MT760 Explained – The MT760 Explained in Terms You Can Understand
You might have heard about an MT760 message. It is a term that you may relate to various financial transactions. However, what it is exactly?
To understand exactly what an MT760 message is, you need to know a bit about the history behind it. Back in 1973, in order to facilitate transfer of money between banks, a group of 239 banks created the Society of Worldwide Interbank Financial Telecommunication, or SWIFT. The initial focus of SWIFT was to develop standard protocols and methods for transferring money between one bank and another. They established operating procedures and rules. The first message sent was in 1977. It revolutionized the banking industry and the way the financial markets worked.
In order to transfer messages, SWIFT developed nine different types of messages. The MT760 is one of those messaging options. Usually, it is a message sent at the request of the account holder, from one bank to another. The account holder wants to show the other bank there are funds available to cover a particular transaction. In order to make this message happen, the account holder agrees that their bank will hold the same amount of funds as security for the transaction. This security feature makes the MT760 a cash-backed financial instrument.
Some banks in the United States do not willingly issue MT760 messages. Before initiating such a transaction, you need to verify that your bank will handle those transactions. There are fees associated with these transactions. It can run as high as 0.05% of the transaction amount. This transaction is common for amounts of $1,000,000 or above.
A common use for the MT760 transaction is to back up large orders of product. The guarantee of funds gives the supplier confidence of payment for the order. However, there is one problem. Once the MT760 transaction is issued, the amount is set. If there are any changes to the order, there has to be new transactions or other negotiations around that MT760 transaction.
Another common use of the MT760 is to back up large projects of many different sorts. To get that, you need to have a good project to begin with. Then you need to have a bank willing to issue the MT760. You will have to cover all the costs of the fees associated with it. You also need to know how you will handle closing the transaction at the end of the project.