Lesson check0 / 2 answered · 0 correct
Check 1
Which standby mainly supports a payment obligation?
Check 2
Does the label alone tell you exactly how to draw?
Financial, Performance and Direct-Pay Standbys
Learn the main standby purposes and common market labels.
Financial standby
Supports a payment obligation.
Example: the applicant fails to pay money due under an agreement and the beneficiary makes a demand under the standby.
Performance standby
Supports performance of a non-money obligation or contractual performance.
A demand may state that the applicant failed to perform as required.
Direct-pay standby
Can be structured to make payment directly without requiring the classic default-style trigger of a backup standby.
It is still a standby undertaking, but the payment function is more primary.
Other common labels
Markets also use labels such as advance-payment standby, bid/tender standby, commercial standby and counter-standby.
Labels help describe purpose, but the actual wording and rules control the instrument.
Remember thisNever judge a standby only by its marketing label. Read the undertaking.
Finished this SBLC lesson?
Mark it complete. Your progress stays on this device.