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We answer your questions in relation to Bank Guarantees. Click here to get the answers you need to make an informed decision.
The Format of a Bank Guarantee
A Bank Guarantee can take many different formats, however, when dealing with Bank Guarantees for monetisation, the Demand Bank Guarantee is utilised. The Demand Bank Guarantee is governed by ICC Uniform Rules for Demand Guarantees (URDG 758) and has a very precise and strict format. When sighted by a bank, lending institution, or any other third-party lender, the extensive documentation will leave them in no doubt that the Bank Guarantee has been issued solely for monetisation.
ICC Uniform Rules for Demand Guarantees, (URDG 758)
The International Chamber of Commerce (ICC), has 45 million members in over 100 countries. The purpose of the ICC is to set rules for global business, including international trade, which are in fact guidelines but are adhered to by all major banks.
URDG 758 are a specific set of rules laid down by the ICC for the issue of Demand Bank Guarantees. The rules ensure that the Demand Bank Guarantee is utilised for the exact purpose specified. Furthermore, crystal clear wording will block any future potential litigation should any of the parties associated with the Demand Bank Guarantee try and challenge the terms of the instrument.
Under URDG 758, the Demand Bank Guarantee underpins the underlying transaction, and for whatever reason, should the Beneficiary default on their financial obligations, the lender can claim against the Demand Bank Guarantee as it is “payable on first demand”.
Cusip and ISIN
The CUSIP and ISIN codes are known globally in the financial world and are used as an identification when trading stocks, shares, futures, derivatives, bonds and other financial instruments.
CUSIP – Committee on Uniform Securities Identification Procedures, is an alpha numeric code used mainly in the United States of America for trading and clearing securities.
ISIN – International Security Identification Number, again is an Alpha Numeric code, used for uniform identification when trading and settling shares in derivatives, options and futures in most parts of the world, especially in Europe.
A number of questions to us from users have been in relation to Euroclear, and reference to some brokers suggesting that Euroclear is a platform for settling Bank Guarantees.
Euroclear is world’s largest international settlement platform for bonds and securities and is one of the largest securities’ depository in the world.
Euroclear is not platform for settling Bank Guarantees. The misunderstanding is most likely related to “Euroclear Bank” which took over Euroclear in 2001. Euroclear Bank is an entirely separate entity from Euroclear,
Euroclear Bank is as any bank known for issuing Bank Guarantees but that is unconnected to the activities of the Euroclear securities depository.
What format would a Bank Guarantee for monetisation take?
A Bank Guarantee can take many different formats, however, when dealing with Bank Guarantees for monetisation, the Demand Bank Guarantee is utilised.
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