STANDBY-LC
Standby Letter of Credit SBLC guarantee instrument ISP98.
Définition
SBLC types : (1) Performance SBLC : guarantees applicant's performance under contract (e.g., contractor completes construction project on time + spec, if defaults beneficiary claims SBLC). (2) Financial Standby (Payment SBLC) : guarantees applicant's payment obligation (e.g., backstop trade credit, applicant fails to pay supplier, supplier claims SBLC). (3) Bid Bond Standby : guarantees bidder will honor bid + sign contract if awarded (bidder reneges, beneficiary claims SBLC). (4) Advance Payment Standby : guarantees return of advance payment if applicant fails to deliver. (5) Warranty Standby : guarantees applicant's warranty obligations post-delivery. (6) Direct Pay Standby : actually used for primary payment (similar to commercial L/C) but governed by ISP98 instead UCP 600. ISP98 vs UCP 600 : ISP98 specifically designed for standby use (more flexible for guarantee context, accommodates electronic presentation more clearly, default presentation period 21 days vs UCP 600 default), UCP 600 still permitted for SBLC if drafted under UCP. Issuance : MT760 SWIFT message (Guarantee/Standby Letter of Credit), explicit subject ISP98 or UCP 600. Settlement : on demand draw (beneficiary submits draft + statement of default), issuing bank pays + reimburses by applicant. SBLC market : ~$1T+ outstanding globally 2024 (US banks dominate ~50% global SBLC issuance, Citibank + JPMorgan + Bank of America + Wells Fargo + multiple regional).
Origine
Standby L/C developed 1960s+ US banking ; ISP98 published 1998 by ICC + IIBLP ; current ~$1T+ outstanding globally 2024.
Exemple en contexte
Construction project French contractor builds factory Saudi Arabia USD 50M ; client Saudi Aramco requires Performance SBLC 10% USD 5M as performance guarantee : French contractor's bank BNP Paribas issues MT760 SBLC USD 5M to Saudi National Bank ; if contractor fails complete project per contract, Saudi Aramco draws SBLC by submitting statement of default to SNB, SNB pays USD 5M, BNP Paribas reimburses by French contractor.
Termes liés
- ISP98 Standby — governing rules.
- Bank Guarantee — civil law equivalent.