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.
References in periodicals archive ?
Back-to-back credits are usually requested by middle persons who do not have sufficient credit available at their banks to open their own L/Cs to the ultimate suppliers.
There are inherent risks associated with every back-to-back credit arrangement since performance under the original L/C is contingent upon timely and perfect execution of the second L/C.
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.