Factory vetting process step — bank reference check
In brief: A bank reference check for a Bangladesh buying house or factory is a letter on the primary bank's letterhead, signed by a branch manager or above, dated within the last three months, stating when the banking relationship began and whether an active working capital facility exists. A relationship under 18 months or refusal to confirm the facility is a warning signal.
3 mo
Max letter age
A bank reference letter older than three months is treated as expired and re-requested.
18 mo
Relationship floor
A banking relationship under eighteen months is a warning signal worth investigating before any order.
Branch+
Signing authority
Signed by a branch manager or above — never a junior account officer.
I have managed first orders for European brands across knitwear, woven, denim, and sweater categories for twenty-five years. Of every vetting document I request before a factory enters our active list, the bank reference letter is the cheapest to obtain, the fastest to read, and the one most buying houses skip or accept in the wrong form. That is the gap this article addresses.
What does a bank reference letter for a Bangladesh factory need to include?
The bank reference letter I require is on the factory's primary bank letterhead — not a generic compliance template, not a scanned image of a logo. It is signed by a manager at branch level or above, dated within the last three months, and explicitly states the date the banking relationship began.
That last point is the one most buying houses miss. A letter that says "X is a valued customer" tells you nothing useful. A letter that says "X has held its primary banking relationship with this branch since March 2019" tells you the factory has survived five years of Bangladesh's volatile RMG financing cycle with the same bank. Those two sentences cost the bank the same effort to write. Only one of them is evidence.
If the bank will not state the relationship start date, the letter is unusable. I send it back and request a properly formatted version. About a third come back amended. The rest do not — which is itself information.
Why does an 18-month banking relationship floor matter?
A banking relationship under 18 months is a warning signal. Factories that change primary banks often do so under financial stress — a previous bank pulled the working capital facility, refused to renew a back-to-back LC line, or downgraded the credit grade. The factory moves to a new bank that has not yet seen the underlying numbers play out.
Eighteen months is the minimum window in which a Bangladesh bank's credit review process will have run a full cycle on the new customer. Below that, the new bank is operating on the relationship the factory presented, not the operating reality it has observed. I have seen factories with pristine 12-month references collapse in month 14 because the previous bank's exit was not disclosed in the new relationship.
This is not the same as automatic rejection. A new factory built from scratch in the last eighteen months is a different conversation than a 15-year-old factory that quietly changed banks last year. The reference letter forces that conversation onto the table.
What does the working capital facility line confirm?
Bangladesh factories operate on bank credit, not own cash. The mechanism is the back-to-back letter of credit — the factory uses the buyer's LC as collateral to draw a working capital facility from its bank, then uses that facility to purchase fabric from mills. If the bank withdraws the facility, production halts within weeks. The 2022 failure that rebuilt our process started precisely there. The longer version of that account is at the 2022 supply chain failure that built Bengal Origin Co. article, and the underlying mechanics are covered in how Bangladesh factory financing actually works.
So the reference letter must state whether the factory has an active working capital facility. Many banks will not state the facility amount — that is treated as commercially confidential. That is acceptable. Refusal to confirm the existence of the facility is not. A bank that will not confirm whether its own customer has a live working capital line is telling you something it cannot say out loud.
How does the bank reference compare with other vetting documents?
The bank reference letter is the entry point, not the whole financial vetting protocol. The two columns below contrast what most buying houses currently accept against what Bengal Origin Co. requires before a factory enters the active list.
| Requirement | Common practice | Bengal Origin Co. requirement |
|---|---|---|
| Document source | Any branch officer | Branch manager or above |
| Letter age | Up to twelve months | Within the last three months |
| Relationship history | Not stated | Date relationship began, explicitly |
| Minimum relationship length | Not assessed | 18 months floor, or explained exception |
| Working capital facility | Not asked | Existence must be confirmed in writing |
| Facility amount | Often demanded, often refused | Not required — banks decline routinely |
| Refresh cycle | One-time check | Every six months alongside solvency certificate |
Source: Bengal Origin Co. factory onboarding records, 2022-2026 — covers 120+ vetted facilities and 14 rejections on bank reference grounds.
The bank reference letter sits at the start of the sequence. The bank solvency certificate, quarterly financial review, and traffic-light monitoring system that follow are described in how Bengal Origin Co. vets factories financially.
Bank reference letter — required versus refusal
Primary bank letterhead with branch address
Signed by branch manager or above
Dated within the last three months
Date the banking relationship began
Active working capital facility confirmed
Back-to-back LC line, even without amount
Junior account officer signature only
"We cannot disclose" on facility status
Banking relationship under eighteen months
Primary bank changed in last twelve months
Letter older than six months, no refresh
Letter on a generic template, not letterhead
What This Means for European Brands
If your current sourcing partner cannot show you the bank reference letters on file for the factories producing your orders, you do not have a financial vetting process — you have a relationship that depends on the partner's judgement. Ask for the letters. Read the relationship start date. Read the facility confirmation line. If either is missing, the letter is decorative. CSDDD and LkSG both require ongoing monitoring of supply chain risk, and unverified factory finance is precisely the risk most monitoring systems do not catch.
The bank reference check is one of the lowest-cost, highest-signal steps in the entire factory vetting process. It will not, on its own, prevent a delivery failure. It will, on its own, surface the factories where a delivery failure is more likely than the audit certificates suggest. That is enough reason to do it properly.
If you want to see the bank reference letters and solvency certificates we hold on file for the factories in your category, I am happy to walk through what proper documentation looks like in practice.
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