STANDBY LETTER OF CREDIT

The terms SBLC and BG are interchangeable, both do the same work and both serve the same purpose. All the above examples can be issued either in the form of a BG or a SBLC. The difference between a BG and a SBLC is legal, a BG is a simple obligation subject to civil law whereas a SBLC is issued subject to UCP 500 and ISP 98, both well-accepted banking protocols.

Both SBLCs or BGs can be issued and sent by Swift, telex, courier, mail, messenger or pigeon. The mode of transmission does not matter.

It is therefore clear that both SBLCs and BGs are not trade-able securities nor are they negotiable instruments for the simple reason that they are issued for a specific purpose covering an underlying obligation and this purpose and underlying obligation cannot be transferred to anyone.

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