Final answer:
In export/import transactions using a letter of credit, the exporter's bank can serve as the advising bank, confirming bank, or both. The advising bank notifies the exporter of the L/C, while the confirming bank guarantees payment.
Step-by-step explanation:
In an export/import transaction requiring a letter of credit (L/C), the bank roles can be differentiated as follows: The exporter's bank is typically known as the advising bank, which means that it advises the exporter that the letter of credit has been opened in his favor by the importer's bank.
The confirming bank, on the other hand, is a bank that adds its confirmation to the L/C, meaning that it guarantees payment to the exporter if the issuing bank is unable to make payment on the L/C. It is possible for the exporter's bank to serve as both the advising bank and the confirming bank, depending on the agreement between all parties involved.
The advising bank plays a role in notifying the exporter about the L/C and forwarding the L/C to the exporter, while the confirming bank adds an additional layer of guarantee by confirming and promising to honor the L/C.