Backstop Letter Of Credit for Singapore

Backstop Letter Of Credit Template for Singapore

A Backstop Letter of Credit under Singapore law is a contingent payment instrument issued by a bank to guarantee another letter of credit. It serves as a secondary guarantee mechanism, providing additional security to the beneficiary. The document is governed by Singapore's Banking Act and follows international banking practices including UCP 600 and ISP98, while adhering to Monetary Authority of Singapore (MAS) guidelines.

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What is a Backstop Letter Of Credit?

A Backstop Letter of Credit is utilized when additional security is required for an existing letter of credit transaction. This document, governed by Singapore law, provides a secondary payment guarantee that can be drawn upon if the primary letter of credit fails. It includes specific terms for drawing conditions, expiry dates, and documentation requirements. The instrument is commonly used in international trade and project financing, where multiple layers of security are needed. The document must comply with both Singapore banking regulations and international banking practices.

What sections should be included in a Backstop Letter Of Credit?

1. Issuing Bank Details: Complete legal name, registration details, and authorized signatories of the issuing bank

2. Beneficiary Details: Complete legal name and address of the beneficiary of the backstop letter of credit

3. Credit Amount and Currency: Specified amount, currency, and any tolerance levels of the backstop letter of credit

4. Term and Expiry: Effective date, expiry date, and any auto-extension provisions of the credit

5. Drawing Conditions: Specific terms and conditions under which the credit may be drawn, including required documentation

6. Governing Law and Jurisdiction: Specification of Singapore law as governing law and jurisdiction for disputes

7. Regulatory Compliance: Statement of compliance with UCP 600, ISP98, and applicable MAS regulations

What sections are optional to include in a Backstop Letter Of Credit?

1. Transfer Rights: Optional section specifying whether and how the credit may be transferred to another beneficiary

2. Partial Drawings: Optional section detailing provisions for multiple or partial drawings under the credit

3. Revolving Terms: Optional section specifying terms for automatic reinstatement of the credit amount

4. Electronic Presentation: Optional section detailing terms for electronic presentation of documents under eUCP

What schedules should be included in a Backstop Letter Of Credit?

1. Schedule A - Form of Demand: Standard template for making drawings under the backstop letter of credit

2. Schedule B - Required Documents: Comprehensive list of documents required for drawing under the credit

3. Schedule C - Fee Schedule: Details of all applicable fees, charges, and commission rates

4. Schedule D - Original LC Details: Details of the primary letter of credit being supported by this backstop LC

5. Schedule E - Authorized Signatories: List of authorized signatories and specimen signatures for the issuing bank

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

Singapore

Publisher

Genie AI

Document Type

Letter of Credit

Cost

Free to use
Industries

UCP 600: Uniform Customs and Practice for Documentary Credits - The primary international rules governing letters of credit operations globally, widely adopted in Singapore

ISP98: International Standby Practices - Specific rules governing standby letters of credit, complementing UCP 600

Banking Act (Chapter 19): Singapore's primary banking legislation governing banking institutions and their operations, including trade finance activities

Bills of Exchange Act (Chapter 23): Singapore legislation governing negotiable instruments, relevant for letter of credit transactions involving bills of exchange

Contract Law (Chapter 53B): Singapore contract law principles applicable to letter of credit agreements and related contractual obligations

Electronic Transactions Act (Chapter 88): Legal framework for electronic transactions and digital signatures in Singapore, relevant for electronic letters of credit

MAS Guidelines on Letters of Credit: Regulatory guidelines issued by Monetary Authority of Singapore specifically for letter of credit operations

MAS Notice 632: Specific regulatory notice on letters of credit and trade financing activities issued by MAS

ABS Guidelines: Guidelines issued by the Association of Banks in Singapore relating to banking practices including letters of credit

ICC Rules: International Chamber of Commerce rules and standards for international banking operations

SWIFT Standards: International standards for electronic communication of letter of credit transactions through the SWIFT network

Teams

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