An obligation issued by a bank on behalf of a bank customer to a third party. A standby letter of credit is a bank promise to pay the third party in the event of some defined failure by the bank's customer, usually, but not always, a failure to pay. Standby letters of credit are often used as credit enhancements for securities issued by bank customers. American Banker Glossary
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Agreement to guarantee invoice payments to a supplier; a standby LOC promises to pay the seller if the buyer fails to pay. Bloomberg Financial Dictionary
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Documents evidencing failure of the bank's customer (the applicant) to pay an obligation when due. Bloomberg Financial Dictionary
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standby letter of credit UK US noun [C] (plural standby letters of credit)
► FINANCE, BANKING an official document from a bank promising to pay back a loan, etc. if a customer fails to do so: »
Standby letters of credit are a commonly used financial device when dealing with large international contracts.
Financial and business terms. 2012.