Bank facility – the letter of guarantee

A letter of guarantee is an agreement by a bank (the guarantor) to pay a set amount of money to another person (the beneficiary), if the bank's customer (the principal) defaults on a payment or an obligation to the beneficiary. Letters of guarantee are not transferable, and apply only to the beneficiary named in the guarantee agreement. The principal can request an increase or decrease in the value of a letter of guarantee, subject to the terms of the agreement.

The following diagram illustrates the required configuration and setups in order to utilize the letter of guarantee function. The Letter of Guarantee – LG function configuration should be activated, in addition to the basic setups, including ...

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