BG – Bank Guarantee explained by Geordon Saraveloz

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A bank guarantee is a type of financial backstop offered by a lending institution. The bank guarantee means that the lender will ensure that the liabilities of a debtor will be met. In other words, if the debtor fails to settle a debt, the bank will cover it.

KEY TAKEAWAYS
• A bank guarantee is when a lending institution promises to cover a loss if a borrower defaults on a loan.
• Parties to a loan choose direct guarantees for international and cross-border transactions.
• The guarantee provides additional risk to the lender, so loans with such a guarantee will come with greater costs or interest rates.

Specimen of a Bank Guarantee issued via SWIFT MT760

MT760 – SPECIMEN OF A BANK GUARANTEE
DATE OF ISSUE : XXXXX
FORM OF CREDIT : IRREVOCABLE BANK GUARANTEE
ISSUER : PRIVATE BANK
CREDIT NUMBER : BG/XXXXX
CURRENCY CODE : EUR/USD
CREDIT AMOUNT : XXXXX
DATE AND PLACE OF EXPIRY : XXXXX
APPLICANT : XXXXX
BENEFICIARY : XXXXX
BANK OF BENEFICIARY : XXXXX
PLACE FOR PRESENTATION : AT OUR COUNTERS
FORM OF PRESENTATION : PAPER / BY COURIER SERVICE
LANGUAGE OF ANY
REQUIRED DOCUMENTS : ENGLISH
PARTY LIABLE FOR THE
PAYMENT OF ANY CHARGES : BENEFICIARY
UNDERLYING RELATIONSHIP : XXXXX

WE HEREBY IRREVOCABLY AND UNCONDITIONALLY WITHOUT PROTEST OR NOTIFICATION, WITH OUR FULL RESPONSIBILITY, UNDERTAKE TO PAY AGAINST THIS GUARANTEE NUMBER SBBG/XXXXX TO THE ORDER OF XXXXX, THE BEARER OR HOLDER THEREOF AT EXPIRY DATE OF THE DD OF MM, YYYY, THE SUM OF EUR/USD XXXXX (XXXXX EURO / US DOLLARS ONLY) IN LAWFUL CURRENCY OF EUROZONE / UNITED STATES OF AMERICA UPON SURRENDER AND PRESENTATION OF THE ORIGINAL HARD COPY OF THIS GUARANTEE AS PER OUR FILE ACCOMPANIED BY THE BANK OF BENEFICIARY’S WRITTEN AND SIGNED STATEMENT THAT THE AMOUNT DEMANDED IS IN ACCORDANCE TO THE TERMS AND CONDITIONS OF THE AGREEMENT NO. XXXXX. SUCH PAYMENT SHALL BE MADE WITHOUT SET OFF AND SHALL BE FREE AND CLEAR
OF ANY DEDUCTIONS OR CHARGES, FEES, OR WITHHOLDINGS OF ANY NATURE PRESENTLY OR IN THE FUTURE IMPOSED, LEVIED, COLLECTED, WITHHELD OR
ASSESSED THEREIN OR THEREOF. PAYMENT IS AVAILABLE UPON THE BENEFICIARY’S FIRST WRITTEN DEMAND IN THE FORM OF PRESENTATION INDICATED ABOVE ONLY TO BE SENT TO US NOT EARLIER THAN 15 (FIFTEEN) DAYS BEFORE EXPIRY DATE BUT WITHIN THE VALIDITY OF THIS GUARANTEE.

THIS GUARANTEE IS TRANSFERABLE SUBJECT TO OUR APPROVAL. THIS GUARANTEE IS SUBJECT TO THE UNIFORM RULES FOR DEMAND GUARANTEES, ICC PUBLICATION NO. 758, (URDG) 2010 REVISION AND SHALL BE INTERPRETED IN ACCORDANCE WITH THE LAWS OF ENGLAND. ANY DISPUTE ARISING OUT OF OR IN CONNECTION WITH THIS GUARANTEE SHALL BE SUBJECT TO THE EXCLUSIVE JURISDICTION OF THE COMMERCIAL COURT OF ENGLAND.

THIS BANK GUARANTEE IS AN OPERATIVE INSTRUMENT.
FOR AND ON BEHALF OF (NAME OF THE ISSUING BANK)

AUT HORIZED OFFICER AUTHORIZED OFFICER
(NAME, TITLE. PIN CODE) (NAME, TITLE, PIN CODE) 

 

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