Letter of Guarantee
From Open Risk Manual
Definition
Letter of Guarantee. It is the undertaking, normally on the part of a financial institution, either to fulfill the obligations of another party or to pay a specified amount of money upon presentation of specified documents stating that the party is guaranteed from defaults on certain obligations. One must be careful to discern which type of guarantees one is dealing with as they both require presentation of documents but work very differently thereafter. USA law forbids financial institutions from providing guarantees. They use letters of credit to accomplish the same goal.
