Cash Backed Bank guarantee

The term ‘cash-backed’ Bank Guarantees is another misnomer. Whether a Bank Guarantee is issued on the strength of the instructing party pledging cash with his bank or stocks, shares, bonds or other assets makes no difference to the acceptance of the Guarantee whatsoever. The Issuing Bank will honour the Guarantee according only to its wording and not related in any way to its underlying security. Parties offering facilities where they refer to ‘Cash-Backed BG’s only’ should be avoided.