standby credit

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A letter of credit that guarantees a loan or other form of credit facility. The bank that issues it promises to refund the amount borrowed if the borrower defaults on repayment. It calls for a certificate of default by the applicant. In a note issuance facility a standby credit is a third-party guarantee to honour an issue to an investor who may have a low credit rating. See also revolving bank facility.

Subjects: Financial Institutions and Services.

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