Back to Basics – Bank Guarantees


In principle, guarantees can be issued by any one of a number of entities. 


Different types of guarantee can be used throughout the lifetime of a contract. 


Bank guarantees are versatile instruments that can be used to represent to a third party that a bank is willing to make payment(s) on its customer's behalf, if and when called upon to do so. Most often, these payments are to be made when the customer has failed or refused to do so itself.    


Guarantees are predominantly issued subject to local law and is largely based on historical preference. A guarantee is often seen as a beneficiary focussed product. It is the beneficiary that will often provide the text of the required wording, with instructions to the applicant to arrange issuance in exactly the same form, which may include issuance in a local language.


Issuance can also be according to standard text adopted by the guarantor for each type of guarantee e.g., performance, bid or tender, advance payment, etc. Issuers of any type of guarantee are more commonly referred to as the guarantor.






This subject is covered in far greater detail within our training module ‘bank guarantees in practice' which can be purchased at


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