Advanced Information

This is an introduction to the advanced information section of our website, where you can find out further in more in-depth information about the buying, selling, and trading of bank guarantees and cashed-back guarantees. We also highlight the main risks involved.

Buying and Selling Bank Guarantees

Did you know? It is not possible to buy or sell a bank guarantee. Any company, individual or institution that are found to be offering money in a way of purchasing a bank guarantee should be reported immediately to the relevant Financial Services Authority.

Trading Bank Guarantees

In this section of advanced information, we explain how a Bank Guarantee is a non-tradeable instrument and therefore carries no Cusip or ISIN identification code. A Bank Guarantee cannot be utilised to enter into, guarantee, or underwrite any form of trade or investment program as it is a non-transferable and non-divisible instrument, and as such has no value for trading purposes.

For more information on Cusip and ISIN, please got to Format.

A Bank Guarantee however, can be used to raise cash, such as loans or lines of credit, (also referred to as Credit Guarantee Facilities). The Beneficiary, should they so desire, would be able to use the advance from their banker to invest in a trading opportunity, a structured investment, or utilised for project finance.

For more information on raising loans and lines of credit, please go to Monetising, or Leasing.

Again, any individual, company or institution who purports that they are able to use a Bank Guarantee for trading purposes, should be reported to the relevant Financial Service Authority.

Cash-Backed Bank Guarantees

The term cash-backed when used in conjunction with a Bank Guarantee is a complete irrelevance. When a bank issues a Bank Guarantee it is a promise to pay in accordance with verbiage contained within the format, and will accordingly honour their obligation despite any underlying security they have obtained from the provider

The term cash-backed is usually used by those individuals or companies who may not have full knowledge of the bank guarantee market and they should be approached with caution. If you wish to know more details about bank guarantees, please get in contact with one of our experts.

The Risks Explained

Advanced information on the risks for the Provider of a Bank Guarantee

Any company can apply to their bank to issue a Bank Guarantee on their behalf. The bank will look for 100% security before issuing a Bank Guarantee and this can take the form of cash or assets, or if the client is credit worthy, the Bank Guarantee can be issued on margin. The usual application forms will have to be filled out, giving details of currency, amount, and expiry date, the name of the Beneficiary, together with the reasons for applying for a Bank Guarantee, and if for a project the requisite business plan must be supplied.

If the Issuing Bank agrees to issue a Bank Guarantee the mechanics of transferring the Bank Guarantee to the Beneficiaries account is straightforward. Utilising the swift system, (“Society for Worldwide Interbank Financial Telecommunications”), the bank will transfer the Bank Guarantee to the Beneficiary’s bank, using the dedicated message code for transferring Bank Guarantees, Swift MT 760. In some instances, The Issuing Bank will send a pre advice to the Receiving Bank, using the Swift Message Code MT 799 informing them to expect a Bank Guarantee in favour of their client.

For more details on swift, please go to Swift.


Risks for the Receiving Bank

There is no risk to the Receiving Bank. If the bank is lending against a Bank Guarantee, it will be a Demand Bank Guarantee, and as such is callable on First Demand, thus the banks position is secure. Otherwise, they are just acting as an electronic depository or safe keeper of the Bank Guarantee for which they will charge a fee, and they may even demand that their client, the Beneficiary, keeps a minimum balance on the account if they are borrowing from a third party monetiser.


Risks for the Issuing Bank

There are no risks for the Issuing Bank, as in the event of a claim the Issuing Bank will have obtained adequate security from their client, the Provider.


Risks for Lenders Credit Lining a Bank Guarantee

A Bank or third-party lender, when offering a credit line, (See Credit Lining Bank Guarantees), to the Beneficiary of a Demand Bank Guarantee, will lend in the full knowledge that they are totally secured by the Bank Guarantee.

There is no particular risk to the lender, but even though they are fully secured, they will not offer a credit line or loan to the Beneficiary if they feel the underlying transaction is not strong enough to fulfil the obligation of repayment. In this event, the Bank Guarantee would have to be called, and lenders tend not to offer loans or credit lines if they are of the opinion that a claim will be made against the Bank Guarantee.

Past Due Bonds and Long-Term Notes, (LTN’s)

We are often asked questions about old (pre-1970) Bonds and LTNs (Long-Term Notes) and are asked to assess their authenticity. Unfortunately, BankGuaranteeFacts.com is only an informative site. We do not undertake such business to authenticate instruments but are happy to give our advice on how to go about this.

Bonds and LTNs such as Brazilian Petrobras, Electrobras, Chinese Government Bonds, Railway Bonds and any other bonds that have been defunct or are aged (most of these issued over 50 years ago), very rarely have a real and significant value. Often, their values are only that of ‘collector’ value which is often around US$30.00 per bond.

As they are defunct bonds where the issuers (often Governments) have defaulted on the debt, they are almost impossible to enforce. Some Governments have u-turned and have agreed (subject to certain conditions) to honour the original face values, plus an agreed accumulative interest rate. However, this is not the case for the majority.

Although they may indeed be authentic, the real value of the bonds are questionable.

Fraud Warnings

Advanced information on fraudulent paper

There are in existence many unscrupulous traders, companies and individuals offering so called Bank Guarantees for sale. As previously mentioned, Bank Guarantees are non-transferable and cannot be bought, sold or traded.

Any individual or company who are approached by the same, and offered “Fancy Looking” paper or a swift printout purporting to have come directly from a bank’s swift terminal, the individual or company concerned must be reported immediately to the relevant Financial Services Authority.

NEVER PART WITH ANY MONEY FOR THESE DOCUMENTS, THEY WILL BE FALSE AND YOU WILL NEVER GET YOUR MONEY BACK.

Our Advice is Professional and its Free.

Check the Official Blacklist for Fake Providers.


Get In Contact

If you would like to find out more information or have a question regarding the information on this page, please do not hesitate to get in touch with one of our experts by filling out our quick contact form here.