Back-to-Back Credit

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Back-to-Back Credit

An agreement by a bank to guarantee payment by a seller made at the same time another bank guarantees performance by a buyer. Back-to-back credit is intended to reduce the risk of a transaction to a minimum. Back-to-back credit is also called countervailing credit or reciprocal credit. See also: Back-to-Back Letter of Credit.
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It can control sophisticated instruments like standby letters of credit, transferred credits, back-to-back credits, red clause credits, offshore credits, partial shipments/drawings and preadvices.