What is a Bank Guarantee?

What is a Bank Guarantee? A Bank Guarantee is financial instrument or security with a defined value (normally in USD or Euros) that is issued by a bank with full banking responsibility. A Bank Guarantee is a written obligation of the issuing bank to pay a sum on to a beneficiary on behalf of their customer in the event that the customer himself does not pay the beneficiary.

Bank Guarantees are delivered electronically Bank to Bank on the Bank SWIFT network on a MT760 and then a Hard Copy follows by courier 7 days later.

Each Bank Guarantee is issued with an Expiry Date. This means the Security is valid during the term before the Expiry Date. Most Bank Guarantees are issued for a 1 year Term.

The basic function of a Bank Guarantee is to provide Security.

Bank Guarantees are issued for a variety of purposes such as:

  • To improve the credit ratings for issuers of industrial development revenue bonds and commercial papers;
  • To provide back-up facilities for loans granted by third parties;
  • To assure performance under construction and employment contracts;
  • To ensure the account party satisfies financial obligations payable to major suppliers.
  • To be monetized, discounted or funded, the process whereby the Bank Guarantee certificate is turned into usable cash.

The issuance of a Bank Guarantee is a private transaction and does not result in the issuance of any publicly tradable instrument. Bank Guarantees are not trading securities, trading debt instruments, or trading investment funds. There is no public market for the trading of Bank Guarantees, all Bank Guarantee transactions are private transactions. Learn more at www.SecurePlatformFunding.com

Article Published with the Permission of the Original Author

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What is a Bank Guarantee? 2015-12-23T22:34:09+00:00 2017-04-08T20:56:13+00:00 Bruce Green
Categories: Bank Guarantee
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