Bank guarantee

banking

A bank guarantee is a guarantee given by the bank. Through the guarantee, the bank undertakes to respond to the fulfillment of a certain obligation of the guarantor before a third party.

The bank guarantee, therefore, is the guarantee provided by the bank, upon request for a guarantor. Through this, said client confirms that, if it is not able to comply with the obligations, the guarantee will solve any pending obligation that has been breached. In this way, the guarantee is a guarantee operation, because it acts as a guarantee for the creditor, in the event that the client (the debtor) cannot take over his obligations. Therefore, the guarantor or the guarantor will respond to this third party.

The bank guarantee acts as payment insurance. The bank answers for the debtor.

It is very common to see the bank guarantee in the rental contracts.

Types of bank guarantee

Among the types of guarantees that exist, the following can be highlighted:

  • Financial: Those guarantees in which the bank agrees to pay a certain amount, as long as the guaranteed person does not do so.
  • Technical: Guarantees in which the bank responds, before the breach of the guaranteed, for all the debts and obligations of the client. Also, before the third party who comes forward.

How to request a bank guarantee?

Among the conditions required to request a bank guarantee, for example, it should be noted that the guarantor entity will require, at a minimum, the deposit of the guaranteed amount, as well as its deposit in a frozen account.

Another condition that is stipulated is the payment of a series of commissions. Commissions that will depend on the value of the guarantee, the term, as well as a series of other factors. In addition, it must include the corresponding commissions for the study, the opening and the risk involved in said operation.

Finally, another request made by the entity is to know the person to whom the guarantee is guaranteed. That is, the person to whom the payment is intended, in case the client fails to comply with his obligations. In this way, knowing the creditor that, ultimately, will come to execute his right to collection.

These are some of the conditions required by the bank. However, these conditions vary depending on the country, the entity, as well as other aspects, among which the regulation can be highlighted.

Example of bank guarantee

Due to the increasing exposure of owners to non-payment that tenants may generate, it is increasingly common for them to request, before renting the home, a series of guarantees that give credibility to said tenant.

Among these guarantees is the bank guarantee. In this sense, it acts as a payment insurance. That is, the bank responds to the default of payments by the tenant.

In this way, if the tenant breaches his obligation, the landlord can go to the bank and execute the guarantee, for which the bank will respond for his guarantee, in the same way that, later, it will require the capital from him.

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