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Spotlight PEPPOL BIS Billing 3.0 The EU e-invoicing mandate is here — France Sept 2026, Belgium Jan 2026, Germany 2025.

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MT760 — Demand Guarantee / Standby Letter of Credit

The autonomous bank-guarantee instrument. Unlike a documentary credit (MT700) which relies on shipments and documents, MT760 issues an independent and unconditional undertaking: the bank pays on first demand, without detailed document examination.

Purpose

MT760 issues an autonomous bank undertaking: the guaranteeing bank commits to pay the beneficiary on first demand, without being able to invoke defences that the principal might have against the beneficiary. The typical instrument for international trade, public tenders, construction contracts and project financing.

Common use cases:

  • Bid bond — covers the bidder's commitment to sign the contract if it wins the tender.
  • Performance bond — guarantees contract performance.
  • Advance payment guarantee — covers the refund of an advance if delivery does not occur.
  • Standby LC — functional equivalent of a guarantee in the US market (US banking law restricts federal banks from issuing autonomous guarantees, hence the standby usage).
  • Financial guarantee — covers payment of a financial debt (rent, deposit, etc.).

Standby LC vs Demand Guarantee

Both instruments are functionally equivalent: pay on demand without substantive examination of the principal's performance. Differences:

  • Legal framework: standby LC under ISP98 (sometimes UCP 600); demand guarantee under URDG 758.
  • Documentation: standby LC typically lists required documents (a default statement); demand guarantee often just requires a plain written demand.
  • Origin: standby LC is the US instrument; demand guarantee is the European and rest-of-world instrument.
  • :40C: tag: ISPR (ISP98) or URDG (URDG 758) to specify the regime.

Key tags

TagNameUsage
:27:Sequence of TotalPagination (typical 1/1).
:20:Sender's ReferenceUnique guarantee number on the guarantor side.
:30:Date of IssueGuarantee issue date.
:40C:Applicable RulesURDG (URDG 758), ISPR (ISP98), UCPR (UCP 600 if applied to standby).
:77C:Details of GuaranteeGuarantee text: party identification (guarantor, principal, beneficiary), amount, currency, drawing condition, expiry, applicable rules.

Note: MT760 relies heavily on the free-text :77C: tag (up to 5,000 characters). Unlike structured MT700, the guarantee is expressed in legal prose.

Real-world example

First-demand payment guarantee for USD 50,000 issued by BNP Paribas on behalf of ACME SARL in favour of GlobalCo Inc (New York), covering ACME's obligations under a supply agreement, subject to URDG 758 and expiring on 14 May 2027:

text mt760-demand-guarantee.txt 
{1:F01BNPAFRPPAXXX0000000000}{2:I760CITIUS33AXXXN}{3:{108:GUA20260515001}}{4:
:27:1/1
:20:GUA20260515001
:23:NREF
:30:260515
:40C:URDG
:77C:WE BNP PARIBAS PARIS HEREBY ISSUE OUR
IRREVOCABLE FIRST DEMAND GUARANTEE NO. GUA20260515001
IN FAVOUR OF
GLOBALCO INC
500 BROADWAY
NEW YORK NY 10018, USA
ON BEHALF OF
ACME SARL
12 RUE DE LA SOIE
69001 LYON, FRANCE
FOR AN AMOUNT OF USD 50000.00
(USD FIFTY THOUSAND ONLY)
COVERING THE OBLIGATIONS OF ACME SARL UNDER
SUPPLY AGREEMENT DATED 14 MAY 2026
PAYABLE UPON RECEIPT OF YOUR FIRST WRITTEN DEMAND
ACCOMPANIED BY A STATEMENT THAT ACME SARL
HAS FAILED TO PERFORM ITS OBLIGATIONS
THIS GUARANTEE EXPIRES ON 14 MAY 2027
AND IS SUBJECT TO ICC URDG 758
-}
  • :40C:URDG — subject to URDG 758.
  • :77C: — full legal prose with three-party identification, amount, drawing condition (first written demand accompanied by a statement), expiry date.
  • The receiving bank (Citibank New York, advising bank of the beneficiary) will re-advise the guarantee to the beneficiary with an MT768 (Acknowledgement) in return.

Common pitfalls

  • Independence not preserved — a guarantee is independent of the underlying contract. Mentioning contract conditions (to be proven before payment) turns the instrument into a surety, subject to the principal's defences. Classic legal mistake.
  • Expiry without a clear date — every guarantee must have an explicit expiry date. A guarantee "until full performance" is valid in France but sub-optimal: prefer a date.
  • Missing :40C: framework — without specification, the guarantee defaults to the national law, creating uncertainty. Always state URDG 758 or ISP98.
  • "First demand" phrasing weak — wording must be explicit: payable upon first written demand. Any alternative ("subject to evidence of default") weakens the first-demand nature.
  • Issuer / adviser confusion — in MT760, the sender remains the guarantor. If a second bank must confirm, it issues a separate MT760 (confirming bank).
  • MT700 — Issue of a Documentary Credit (different: commercial credit, not guarantee).
  • MT761 — Demand Guarantee continuation (MT701 equivalent for guarantees).
  • MT767 — Amendment to a Guarantee.
  • MT768 — Acknowledgement of a Guarantee (sent by the advising bank).
  • MT769 — Advice of Reduction or Release.
  • MT799 — Free Format Message, for call/release narrative.