5. Completion of credit transfer and its consequences

48. According to article 19(1), "a credit transfer is completed when the beneficiary's bank accepts a payment order for the benefit of the beneficiary". At that point the banking system has completed its obligations to the originator. The beneficiary's bank's subsequent failure to act properly, if that should occur, is the beneficiary's concern. It is not covered by the Model Law but is left to the law otherwise regulating the account relationship.

49. Article 19(1) further provides that, "when the credit transfer is completed, the beneficiary's bank becomes indebted to the beneficiary to the extent of the payment order accepted by it". The Model Law does not enter into the question as to when the beneficiary's bank must credit the beneficiary's account or when it must make the funds available. Those are matters to be governed by the otherwise applicable law governing the account relationship, including any contractual arrangements between the beneficiary and the beneficiary's bank.

50. In many credit transfers the originator and the beneficiary are the same person; the bank customer is merely shifting its funds from one bank to another. In such a case completion of the credit transfer obviously does not change the legal relationship between the originator and the beneficiary. Completion of the credit transfer changes only the relationships between the customer as originator and the originator's bank and between the customer as beneficiary and the beneficiary's bank.

51. Other credit transfers are for the purpose of discharging an obligation due from the originator to the beneficiary. Many delegates to UNCITRAL thought that the Model Law should provide that completion of the credit transfer would discharge the obligation to the extent that the obligation would be discharged by payment of the same amount in cash. Other delegates did not think the Model Law should contain such a rule, either because they did not believe that a rule on discharge of an obligation arising out of contract or otherwise should be included in a law on the banking transaction or because they did not believe that the rule proposed was correct. The position finally taken in UNCITRAL was to include the rule in a footnote to article 19 "for States that may wish to adopt it".