Standby Letter of Credit
Introduction to Standby Letter of Credit business
Letter of guarantee (Standby Letter of Credit) has long been one of Bank of China's competitive products. In recent years, along with China's fast economic growth and its further integration to the world economy after the WTO accession, there has been a marked rising demand for Standby Letter of Credit from Chinese and foreign clients alike, which greatly drives the Standby Letter of Credit expansion of the Bank.
Leveraging on its favorable international reputation and strong Standby Letter of Credit capabilities, the Bank has reaped a major share of the Standby Letter of Credit market. In particular, its foreign guarantee made for domestic organizations takes up over 75% of the market share.
BOC has been focusing on meeting the customers' demands and developing new products. To this end, BOC took the lead in introducing feature products like guarantee for payment of taxes on processing trade and “special risk fund for guarantee for contracts of foreign projects”. Such efforts, as active response to the state policies on economic development, help develop China's processing trade, overseas project contracting and labor export and beef up the import and export trade.
BOC has evident competitive edge in its Standby Letter of Credit business in all aspects: extensive network of domestic and foreign branches and correspondent banks; high international credit; excellent Standby Letter of Credit team; decades of experience in Standby Letter of Credit transactions; sound management over operation and good system for risk control; full range of Standby Letter of Credit products. BOC can satisfy the customers' need for a variety of Standby Letter of Credit products, and offer them quality and efficient service.
To acquaint you with the Standby Letter of Credit business and help you make a wise choice over Standby Letter of Credit products, we'd like to make an introduction to BOC's Standby Letter of Credit in the following respects:
Basic concepts of Standby Letter of Credit
Standby Letter of Credit is a written undertaking made by the guarantor at the request of the applicant to the beneficiary, guaranteeing that the applicant will perform obligations under the contract signed between the applicant and the beneficiary.
· Parties involved in Standby Letter of Credit and their relations are illustrated below:
By the nature of guarantee responsibility, the Standby Letter of Credit is divided into two kinds: credit Standby Letter of Credit and payment Standby Letter of Credit.
Credit Standby Letter of Credit includes tender guarantee, performance guarantee, advance payment guarantee, retention money guarantee, warranty guarantee, customs guarantee, etc.
Payment Standby Letter of Credit includes payment guarantee, financing guarantee, leasing guarantee, guarantee for compensation trade, etc.
Characteristics of Standby Letter of Credit
· The substitution of commercial credit with bank credit solves the problem of mutual distrust between parties to the contract and facilitates the execution of the contract.
· wide scope of application——applicable to trade of commodity, labor and technology, contracting for construction project, undertaking of construction, customs declaration for material import and export, financing from financial institutions or on the financial market, leasing of complete sets of large equipment, litigation guarantee, performance of contractual obligations, etc.
· flexible and diversified format—tailor made to suit specific project or customer requirement
· simple and fast processing
· broad prospects