Introduction to Standby Letters of Credit
Learning Objectives
By the end of this letter of credit course you will be able to:
Walk through the steps in a commercial letter of credit transaction.
Identify when a letter of a credit is a commercial DC or a SBLC.
Explain what an “evergreen clause” is and the circumstances in which one might be used.
Compare and contrast SBLCs with demand guarantees.
Explain the purpose of the capital adequacy regulations found in Basel III.
Understand the purpose of credit conversion factors (CCF).
Understand the two primary principles of letters of credit.
Discuss when and how UCP 600 applies to SBLCs.
Understand how SBLCs compare with bid bonds, performance bonds, and advance payment guarantees.
Explain how a SBLC can be used to arrange the issuance of a guarantee.
Describe how a bank determines the amount of its risk-weighted assets (RWA).
Describe how a SBLC might be used as a substitute for an escrow arrangement.
Course curriculum
Lessons
In this lesson, you will learn what a standby letter of credit is, including some key characteristics. We will also explain the three contracts in a letter of credit transaction, and the two fundamental principles upon which letters of credit are based.
In this lesson, we will look at the two primary characteristics that determine whether or not a letter of credit is a commercial letter of credit (documentary credit), and explore how standby letters of credit generally differ from other types of LCs.
In this lesson, we will dive further into how standby letters of credit evolved from documentary credits and how they grew in the industry to compete with both bank guarantees and DCs.
The focus of this lesson, is to compare and contrast standby letters of credit with demand guarantees. We will also explain the differences in risk protection provided by accessory versus demand guarantees.
In this lesson, we will describe how a standby letter of credit can be used to arrange the issuance of a guarantee by a second bank – and why the documents required in a counter-guarantee standby will not be the same as those required in a local guarantee.
In this lesson, we explain the purpose of the capital adequacy regulations found in Basel III. We will also describe how a bank determines the amount of its risk-weighted assets.
In this section, we will take a look at a sample case study that shows how trade finance solutions can remedy problems often seen in the trade sector.
This section will test your knowledge on what you have learned so far and aims to equip you with the skills and context you will need in the field. Please note, this is not an exam.
FAQs
Answers to your most commonly asked questions.
This course forms part of the curriculum for the Global Trade Certificate (GTC) but can also be purchased on its own.
If you just complete this course then you will earn a Letter of Completion once you finish (please note there is no exam for this individual course).
However, this course can also be put towards achieving the GTC qualification. More details can be found here.
If you complete the GTC then you will earn a Certificate of Achievement, signed by the ICC Secretary General, once you pass the final exam.
A strong interest in trade and trade finance is recommended and all candidates need to be able to read and write in English.
Your purchase includes 12 months to access all the lessons. You can access the lessons as many times as you like within the 12-month access period.
This course is accredited by the London Institute of Banking and Finance (LIBF), The Bankers Association for Finance and Trade (BAFT) and the Global Trade Professionals Alliance (GTPA).
Due to the immediate availability of our course content upon registration, ICC Academy has a strict no-refund policy for our courses and certifications. For more details, please refer to our Terms and Conditions.
This online course will take approximately 3-4 hours to complete depending on your level of experience.
Candidates will have 12 months to complete the lessons.
- One-year access to the online course and all 8 lessons
- A case study and 23 assessment questions – we’ll show you how to apply what you learn to real-world scenarios. Please note this is not an exam.
- 28 animated explainer videos and 1 video lecture
- A printable glossary containing all the key terms for you to refer to throughout the course
- Dedicated, full-time IT support
- Certificate of completion
Yes, all our courses are taken online. This means they are accessible at any time, from anywhere in the world. Learn when and where you want.
This course has been designed for general practitioners working in banks, corporates, or financial institutions in functions such as relationship management, credit and compliance, but with an interest in trade finance.
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