BAFT (Bankers Association for Finance and Trade) has released a guidance paper relating to the use of auto-extension clauses in standby letters of credit and demand guarantees. Whilst primarily produced for use by banks in the United States, banks located elsewhere should find its contents informative and constructive when considering the incorporation of an automatic extension clause into one of your transactions.
This paper outlines the good, the bad and the ugly as it relates to auto-extension clauses and the challenges faced by banks in managing the associated risks.
The paper can be accessed here Guidance Paper for Auto-Extensions.pdf