Standby DC

Please note that Exchange Control approval is required to issue Standby DCs exceeding USD 7,500 in value (This does not apply to companies registered with the Board of Investment who are authorised to maintain accounts in the Foreign Currency Banking Unit).

Guarantee payment in case of default or non-performance Cover a default or non-performance of contract and guarantee payment

Is your supplier uncomfortable about doing business on open account? Do you have an office or subsidiary in another country that needs credit facilities? Your solution may be to use a Standby Documentary Credit.

How do SDCs work?

A Standby Documentary Credit (SDC) is usually used as a guarantee of payment. The Beneficiary of the credit makes a claim in the event of non-performance or non-compliance of an agreement or a contract by submitting the stipulated documents - normally a signed statement certifying a default or non-performance, accompanied by sight drafts for the amount claimed. As long as the documents are compliant, the issuing bank will pay despite an allegation or claim by you, the applicant, that the underlying commercial contract has been breached. For this reason, you need to be absolutely sure of your relationship with the beneficiary to avoid inappropriate drawings being made on the Standby DC.

For details, please discuss your requirements further with our trade services department.

Facility Guarantee

SDCs are used if you would like to use your facility to guarantee a third-party's credit facility. In fact, the most common types of SDC today is opened on behalf of a parent company, in favour of the lending bank, to guarantee facilities granted to its subsidiary. This enables you to leverage the strength of one entity (credit standing, track record, capital, etc.) to support a weaker one. It is not always a matter of relative strength and often the SDC is used to consolidate bank relationships in one office for convenience and control.

Other Common Uses:

• To cover a default or non-performance of an agreement or a contract
• To be used as an alternative to performance and bid bonds