bank guarantee
Post 1 of 4
What's a bank guarantee ? and how safe it is as a buyer ?
21 Apr 2006 23:40
Post 2 of 4
Replying to [tukla]:
A Bank Guarantee is a letter from your bank that guarantees the Seller they will pay him for the goods. Depending on what teh conditions within this guarantee are, as to when the guyers bank will hand over the funds
A Bank Guarantee is a letter from your bank that guarantees the Seller they will pay him for the goods. Depending on what teh conditions within this guarantee are, as to when the guyers bank will hand over the funds
21 Apr 2006 23:46
Post 3 of 4
Replying to [grigo]:
How does bank guarantee works? Could you please explain the procedures and fees charged to do bank guarantee? Thank you.
How does bank guarantee works? Could you please explain the procedures and fees charged to do bank guarantee? Thank you.
22 Apr 2006 04:12
Post 4 of 4
Replying to [tukla]:
A letter of credit is a bank’s DIRECT undertaking to the supplier (called the beneficiary) to pay.
In contrast, a guarantee is a written contract stating that IN THE EVENT the primary party (the buyer) is unable or unwilling to pay its dues to the supplier the bank, as guarantor to the transaction the BG issuer would pay (the client's debt) to the supplier.
Hence, in a BG the initial claim is still settled primarily (i.e., first) against the bank's client, and not the bank itself. Should the client default, ONLY THEN would the bank (which has issued the BG) agree to pay for it's client's debts on behalf of its client. This is a type of contingent guarantee.
A bank guarantee, therefore, is more risky for the merchant and less risky for the bank.
With a bank guarantee, only if a client defaults the bank assumes liability. A letter of credit is less risky for the merchant, but more risky for a bank, though banks accept full liability in both cases.
A letter of credit is a bank’s DIRECT undertaking to the supplier (called the beneficiary) to pay.
In contrast, a guarantee is a written contract stating that IN THE EVENT the primary party (the buyer) is unable or unwilling to pay its dues to the supplier the bank, as guarantor to the transaction the BG issuer would pay (the client's debt) to the supplier.
Hence, in a BG the initial claim is still settled primarily (i.e., first) against the bank's client, and not the bank itself. Should the client default, ONLY THEN would the bank (which has issued the BG) agree to pay for it's client's debts on behalf of its client. This is a type of contingent guarantee.
A bank guarantee, therefore, is more risky for the merchant and less risky for the bank.
With a bank guarantee, only if a client defaults the bank assumes liability. A letter of credit is less risky for the merchant, but more risky for a bank, though banks accept full liability in both cases.
23 Aug 2007 06:17
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