There are different types of Bank Guarantees. Each worded for specific events and purposes. There are effectively two main types of Bank Guarantees: (1) A Direct Guarantee where the account holder instructs his bank to issue a Guarantee directly in favor of the Beneficiary, and (2) An Indirect Guarantee where a second bank is requested to issue a Guarantee in return for a counter-Guarantee. In this case the Issuing Bank will indemnify losses made by this second bank in the event of claim against the Guarantee. The most purposes for the uses of Bank Guarantees are:
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Advance Payment Guarantee Performance Guarantee (Performance Bond) Payment Guarantee Conditional Payment Guarantee (Conditional Payment Undertaking) Guarantee securing a Credit Line Order & Counter Guarantee The costs and charges of arranging ‘Leased’ Bank Guarantees, or to give it its correct term, ‘establishing Collateral Transfer Agreements, will largely depend on the Provider of the assets, i.e the Investor. Depending on the status of the Investor and the quality of his portfolio being placed into the arrangement, it is common to attract investor’s interest at rates as low as 6% per annum to as high as around 12% per annum.