Standby Letter
of Credit/Guarantees

Standby letters of credit/Guarantees are instruments used by the bank on behalf of its customers
 

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Standby Letter of Credit / Guarantees

Standby letters of credit/Guarantees are instruments used by the bank on behalf of its customers that they are willing to make payments on their behalf, if and when called for.

Most often, these payments are to be made when the customer has failed or refused to do so themselves. The value of the bank’s commitment lies in the fact that the bank is obligated to pay, even in the event of a dispute, as long as the documents specified in the Standby L/C are presented as required.


 

A standby letter of credit, however, often takes the form of an obligation by the issuer to the beneficiary

  • To repay money borrowed by or advanced to or for the applicant.
  • To make payment because of a claimed default by the applicant in the performance of an obligation. As such, it may require documents are simple as a statement signed by the beneficiary attesting to the existence of one of these types of situations.