Guarantees issued to cover contingencies that are potentially more severe and less predictable than contingencies covered under trade-related or documentary letters of credit are:

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Standby letters of credit are specifically designed to cover contingencies that are potentially more severe and less predictable than those covered under trade-related or documentary letters of credit. These contingencies may include performance guarantees, financial guarantees or payment guarantees. Standby letters of credit are a valuable risk mitigation tool for businesses as they provide a way for a beneficiary to obtain payment in the event that the applicant fails to fulfill their obligations.

Guarantees Issued to Cover Contingencies That Are Potentially More Severe