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Guarantees for export trade

Bank guarantee is a convenient way to handle your company's needs for collateral security

A bank guarantee is a commitment issued by the bank on your company's behalf in favour of your domestic or foreign contractual partner, under which the bank as guarantor is committed to monetary compensation for the fulfilment of your company's contractual obligation within the stipulations specified in the guarantee commitment.

Your company can use bank guarantees as collateral in various contractual relationships relating to the fulfilment of the parties' contractual obligations.

An international bank guarantee means a guarantee issued in favour of a foreign beneficiary. In the case of a bank guarantee in foreign trade, the beneficiary is your company's foreign contractual partner.

A bank guarantee abroad can be issued as absolute guarantee or first demand guarantee. The first demand guarantee is widely used in international trade.

Fill in the form to apply for a guarantee:

Guarantee application

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Absolute guarantee

The guarantor bank has the right refuse payment to the beneficiary until your company's payment obligation has been determined on the basis of the contractual relationship

First demand guarantee

The guarantor bank undertakes to pay the beneficiary on the grounds of the claim presented by the beneficiary according to the terms of the guarantee obligation without the guarantor examining whether the beneficiary has the right to receive the payment on the basis of the contract of sale. These are called first demand guarantees.

In some countries, beneficiaries do not accept a foreign bank's guarantee or it is not in accordance with the laws/ commercial practice of the country concerned. In such a case, the guarantee is issued through our correspondent bank as an indirect guarantee. We request our correspondent bank to issue a guarantee to your company's contracting partner. At the same time, we issue a counter-guarantee to our correspondent bank. This counter-guarantee to our correspondent bank is always a first demand guarantee.

The customer usually also pays the guarantee charges of the correspondent bank.

The most widely used guarantees in foreign trade are as follows:

  • Bid Bond or tender guarantee which compensates for a loss if the exporter cancels its bid, does not sign the contract after acceptance of the bid or does not obtain a performance bond required by the contract. Usually accounting for 2‒5% of the bid's value, the bond is valid from the date of the bid until its acceptance.
  • Performance bond or performance guarantee compensates a loss caused to the buyer if the performance is not in accordance with the contractual terms. This bond is valid from the date of signing the contract until performance. It usually accounts for 10‒20% of the contract price.
  • Advance payment guarantee/bond ensures that the buyer recovers advance payment in case the performance is not according to the contract terms or in the case of non-performance. The advance payment guarantee is issued for the full amount of advance payment.
  • Maintenance guarantee, warranty guarantee, retention money bond is issued by the exporter after the delivery or performance has been completed. The guarantee compensates a loss caused to the buyer if the exporter fails to correct any deficiencies or defects within the guarantee period. This guarantee usually accounts for 5‒10% of the contract price.
  • In addition to the above, other guarantees include those issued in security for the fulfilment of various contractual obligations (e.g. exclusive distribution agreement, lease and rental agreement) and collateral securities to the authorities as required by laws or official regulations.

 

Bank Guarantee Online Service on Corporate eServices provides your company with state-of-the-art solutions for applying for and managing bank guarantees and for real-time information on your company's guarantee portfolio.

Your company can apply for bank guarantees easily, efficiently and securely. If needed, you can also attach electronic documents to your application. Through this online service, an application register is available to your company to monitor and manage guarantee applications. If needed, it is also possible to include an acceptance function of guarantee applications and guarantee commitment text in our online service, supporting your company's internal guarantee process.

The online service helps your company to be up to date at all times. On the service, we maintain a guarantee ledger needed by your company and an electronic archive for guarantee commitment texts.