Why Top Banks LOVE Reliable SBLCs in 2025!

As the beneficiary, you should be interested in the reliability of the bank that issued the SBLC, as the bank's reliability is your guarantee of receiving your funds in case of your trade counterparty's insolvency. Therefore, the reliability of the issuing bank is what gives value to your SBLC and attracts interest from monetizers.

Let’s use an example: Goverment issues a 100 € paper note. Take the 100 € anywhere and it is accepted as a form of payment. That’s all there is to it, right?

Let’s use Another example: Bank issues a Standby Letter of Credit (SBLC, also known as an Letter of Credit also known as a Bank Guarantee – they are all the same with a different name based on the bank and country doing the issuing). Take the SBLC to any bank anywhere, present it, and get cash in return. In turn, bank sends SBLC to issuing bank and they get their money back from that issuing bank.

Some howevers: Issuing banks are rated from BIG to teeny. Big banks are far more stable and reliable, so the “quality” of the SBLC is rated accordingly. For small banks, unrated or poorly rated, the SBLC, when transferred, MUST pass through (and thereby be “re-issued”) by a top rated bank, thereby creating more stabilization and reliability for that instrument (not the original issuing bank).

If it will NOT be re-issued by the top rated bank, the SBLC has no trading value; the only value it has is between the client (holder of the SBLC) and the issuing bank itself (assuming he cashed it in before the small bank goes out of business!). If sent by a top-rated bank, the SBLC is treated as if it was issued originally by that same top rated bank.