Stand-by letter of credit

The stand-by letter of credit is a bank guarantee issued in the form of a letter of credit, to guarantee the performance of a contractual obligation. The issuing bank undertakes to indemnify the beneficiary for any failure of the ordering party of meeting its obligations under the contract.

Securing the transactions with the commercial partners;
Reliable and safe services due to the BRD team of professionals and its extended network of banking correspondents in over 80 countries;
Product governed by the international regulatory standards.

If you are an importer, the money retention stand-by letter of credit ensures that the down payment is returned by the exporter in case of failure under the contractual obligations.
If you are an exporter, the payment stand-by letter of credit guarantees the payment of the equivalent value of the delivered merchandise / services, if the importer does not pay.

How does the stand-by letter of credit work?

Step 1. The partners agree by contract on the terms of the operations and establish as means of payment the stand-by letter of credit.
Step 2. At the request of the ordering party, its bank (the issuing bank) opens the documentary letter of credit to the benefit its commercial partner (beneficiary), according to the conditions of the contract signed with the latter The issuing bank sends the text of the stand-by letter of credit to the correspondent bank in the exporter’s country (the bank of the beneficiary).
Step 3. The correspondent bank notifies the beneficiary on the opening, to its benefit, of a stand-by letter of credit.
Step 4. If the ordering party does not meet its contractual obligations, the beneficiary presents to the correspondent bank all the documents stipulated upon the opening of the stand-by letter of credit and demands that payment be made. After checking the documents, the correspondent bank sends them to the issuing bank for payment. The issuing bank makes the payment and debits the account of the ordering party.

The letters of credit provided by the bank are:

Irrevocable letter of credit – which covers against commercial risks
Confirmed letter of credit – which, in addition to covering the commercial risks, also covers the risk of insolvency of the issuing bank and the country risks – political and transfer, if the corresponding bank is in another country than the issuing bank.

Is there a list of correspondent banks?

Yes, you may find below the list of correspondent banks, as well as certain documents that are useful for the company’s international relationships.

Correpondent banks list
Anti-money laundering questionnaire
Patriot Act