Final answer:
In import/export transactions involving a letter of credit, the exporter's bank is the advising and/or confirming bank, and the importer's bank is the issuing bank. Banks lower transaction costs and facilitate secure international trade.
Step-by-step explanation:
The role of banks in import/export transactions involving a letter of credit (L/C) is well-defined. Option B) correctly states that the exporter's bank is the advising and/or confirming bank, while the importer's bank is the issuing bank. The issuing bank guarantees the payment to the exporter on behalf of the importer, provided that the terms of the L/C are met. The advising bank, which is typically in the exporter's country, communicates the L/C to the exporter and may also be the confirming bank if it adds its own guarantee to the payment.
Banks play a critical role as financial intermediaries in these transactions by lowering transaction costs and facilitating the exchange of goods and services for money or other financial assets. They assist in creating a trustworthy environment for international trade by ensuring that both exporters and importers can rely on the secure transfer of funds.