MT-760 Standby Letter of Credit (SBLC) — 2025 Guide and Service Outline

The MT-760 Standby Letter of Credit is a primary instrument for international trade, EPC performance, and structured finance. It is the SWIFT FIN message by which an issuing bank undertakes to pay a beneficiary on a compliant demand if the applicant fails to perform. This guide explains how an SBLC under ISP98 or UCP 600 is built, what drives pricing, which risks derail issuance, and how our desk coordinates authenticated MT-760 transmissions from mandate to release. The objective is simple: an instrument that meets the contract, clears compliance, and arrives on time.

1. What is an MT-760 SBLC

An MT-760 is a bank-to-bank SWIFT message that issues a demand guarantee or standby letter of credit. Unlike domestic paper guarantees, MT-760 traffic is authenticated over SWIFT, creating an auditable record. The issuing bank commits to honour a compliant demand up to the stated amount within the expiry period and under the chosen rule set. ISP98 is preferred for standbys because it addresses non-documentary conditions and partial drawings with clarity; UCP 600 is used where the commercial context dictates.

Key parties and roles

The applicant requests the SBLC and is liable to reimburse drawings. The issuing bank transmits the MT-760 and carries the contingent obligation. The beneficiary is protected by the undertaking, whether a supplier, project owner, lender, or public agency. The advising or confirming bank authenticates the message and, if engaged, adds its own independent undertaking at an agreed price and tenor.

MT-760 vs MT-700 vs MT-799

An MT-700 commercial letter of credit pays against presentation of specified documents and is governed by UCP 600. An MT-760 standby is callable on default or failure to perform and is typically governed by ISP98. An MT-799 is a free-format message used for pre-advice or comfort; it is not a payment undertaking.

2. Use cases across trade and projects

In commodity trade, sellers may load only after receiving an MT-760 from an investment-grade issuer, allowing shipment without cash prepayment while covering buyer default and price exposure. In EPC and construction, employers require performance, advance payment, or warranty guarantees; the SBLC remains in force until mechanical completion or the defined milestone and transfers call risk to the contractor’s bank. For import licences and tenders, regulators often require a standby before releasing permits, using the MT-760 as evidence of capacity. In structured debt, a rated standby placed with a lender can reduce coupon and extend tenor, with the instrument callable only if cash flows fall short.

3. Anatomy of the MT-760 — what credit reviews

Accurate drafting reduces amendments and avoids re-issues. Tag 20 holds the unique transaction reference; duplication triggers rejection at the SWIFT interface. Tag 23 identifies the applicable rules; mixing ISP98 with UCP 600 language undermines enforceability. Tag 32B sets amount and currency and should align with the underlying contract. Tag 39A sets expiry and must cover the shipment or performance window with a realistic buffer. Tag 40C states the applicant’s legal name and must match corporate records. Tag 41a names the advising bank and must carry a valid BIC. Tag 42C identifies the beneficiary and may require evidence of licensing or authority. Tag 44C specifies governing law and jurisdiction; unfamiliar courts limit confirmation appetite. Tag 57a sets the account with institution and must avoid sanctioned branches. Tag 72 carries sender-to-receiver information; broad undertakings that conflict with LC rules should be avoided.

4. Issuance workflow and timeline

The process starts with a pre-screen of the applicant, transaction summary, and KYC. A mandate and retainer are executed on Day 1 to initiate detailed diligence. The issuer then performs underwriting on Days 4 to 10, reviewing balance sheet strength, collateral, sector risk, and tenor. Draft wording is finalised on Days 11 to 15, aligning law, expiry, amount, call conditions, and rules. Fees are funded on Day 16, including issuing commission and, if required, confirmation costs. SWIFT transmission occurs on Days 17 to 18 with acknowledgement by the beneficiary’s bank. During the life of the instrument, monitoring tracks milestones and amendments, followed by release or termination at completion or expiry.

[Pre-screen]
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[Mandate + Retainer - Day 1]
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[Underwriting - Days 4–10]
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[Draft Wording - Days 11–15]
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[Fees Funded - Day 16]
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[SWIFT MT-760 - Days 17–18]
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[Monitoring, Amendments, Release/Termination]

5. Cost structure and economics

Pricing reflects credit, jurisdiction, collateral, tenor, and confirmation. Applicants typically fund an advisory retainer at mandate, then pay the issuer’s commission quoted per annum, often invoiced quarterly in advance. A success fee may apply on transmission. Confirmation, if required by the beneficiary or their bank, is priced separately and depends on issuing bank rating, country risk, and tenor. SWIFT and test key charges are minor relative to face value. Amendments attract fixed fees; drawings convert the contingent obligation into a loan at the agreed benchmark plus margin.

Case study A — commodities (single paragraph)

A trader purchases USD 10 million of copper cathodes on 60-day terms and is required to provide an MT-760 under ISP98 from a rated European bank; the issuing commission is quoted at 1.00 percent per annum, the advisory success fee at 2.5 percent of face value, and standard SWIFT fees apply, bringing the up-front cash cost to approximately USD 315,000; the SBLC is transmitted on Day 17, shipment proceeds on schedule, and the instrument is cancelled at expiry with no drawings.

Case study B — performance bond (single paragraph)

A contractor needs a EUR 3 million performance standby for an 18-month solar EPC contract governed by English law; the issuing bank charges 0.90 percent per annum, a confirming bank prices 0.35 percent per annum due to local risk, and an advisory success fee of 3.0 percent is paid on transmission, resulting in total fees of EUR 149,400 across the life of the SBLC, with the standby released after mechanical completion and defects-notification obligations are satisfied.

6. Risk management and compliance

KYC and sanctions screening cover ownership, directors, routes, counterparties, and cargo to ensure policy compliance. Offers of “leased SBLCs” or instant monetisation without collateral present fraud risk and should be rejected. Collateral may include cash cover, pledged deposits, receivables assignments, or other security; limited collateral capacity results in higher fees or reduced limits. ISP98 is generally preferred for standbys because it reduces ambiguity; departures from standard rules should be tightly controlled and justified. Confirmation is requested where the beneficiary’s bank requires a second undertaking due to issuer rating or country risk.

[KYC & Sanctions]
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[Collateral & Controls]
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[Rule Set & Legal Review (ISP98 / UCP 600)]
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[Confirmation Decision]
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[Reporting, Variance Handling, Release]

7. Frequently asked questions

Can an MT-760 be monetised? Borrowing capacity depends on the applicant’s credit and collateral, not the standby alone. Any offer of instant cash against face value without recourse to the applicant should be viewed as high risk.

How long does issuance take? For repeat clients with current KYC, a straightforward standby often reaches the beneficiary within five to seven banking days from mandate. First-time applicants typically require three to four weeks due to issuer diligence cycles.

Is confirmation always required? No. If the issuing bank is acceptable to the beneficiary and their bank, confirmation adds cost without benefit. The decision depends on rating, country, tenor, and the beneficiary’s policy.

What happens if the standby is called? The issuing bank pays against a compliant demand. The applicant’s contingent liability becomes a loan that accrues interest at the agreed margin over SOFR or the relevant benchmark until repaid.

8. MT-760 arrangement service

The engagement begins with a 24-hour eligibility view based on the transaction summary and preliminary financials. Diligence covers contract terms, inspection reports, credit, and compliance. A written term sheet defines face value, fees, collateral terms, and timetable. Issuing banks are shortlisted to match jurisdiction and tenor, and legal drafting aligns to ISP98 or UCP 600 with clear, concise wording to reduce discrepancy risk. Execution includes fee settlement, SWIFT transmission, optional confirmation, and post-issuance monitoring through to cancellation.

Selection is based on track record across commodities, energy, and capital goods since 2014, access to multiple issuers to maintain price tension and redundancy, a single point of contact at the trade desk, transparent fee mapping, and strict data governance aligned to FCA standards.

9. Timeline from mandate to transmission

Day 1: mandate is signed and the advisory retainer is paid. Days 1 to 3: the full KYC package is submitted and preliminary credit indicators are received. Days 4 to 10: the issuing bank completes underwriting and collateral is agreed. Days 11 to 15: draft wording is finalised and legal opinions circulate. Day 16: the applicant wires the issuing fee and any agreed confirmation costs. Days 17 to 18: the MT-760 is transmitted over SWIFT and the beneficiary’s bank issues the acknowledgement.

10. Document requirements

Applicants should prepare audited financial statements for the last two fiscal years and the latest interim, corporate registry extracts with a clear ownership chart, the executed purchase or EPC contract referencing the standby, insurance certificates naming the relevant parties, a board resolution authorising issuance and collateral where applicable, and a completed compliance questionnaire with sanctions declarations.

11. Potential deal breakers

Adverse media on shareholders or directors that is unresolved, sanctioned origin or destination for goods, expiry shorter than the voyage or construction period, force-majeure clauses drafted so broadly that underwriters cannot price risk, and attempts to change the beneficiary after issuance without a clear commercial basis will delay or prevent issuance.

Financely Group arranges standby letters of credit and related trade-finance instruments through regulated partners. We are not a deposit-taking bank and do not advance funds on our balance sheet. All mandates require complete KYC, sanctions screening, and an advisory retainer. Final issuance, pricing, and confirmation remain subject to bank approval, documentation, and applicable trade regulations. Minimum ticket size is USD 2 million. Misrepresentation triggers termination and reporting under AML and CTF rules. SBLCs are contingent liabilities. If a drawing occurs, the applicant is responsible for repayment together with interest and fees.