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.

Mentioned in

Back-to-Back Letter of Credit

References in periodicals archive

Noting that the current cost of confirmation of letters of credit was high, both sides agreed on the need to work out back-to-back credit lines between banks for an efficient trade finance arrangement between them.

First Indo-Pak expert group meet ends, takes steps to boost petro trade

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.

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.

Letters of credit - doing business in a global market

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