- Direct or Indirect Guarantees
- ‘Lease’ (Collateral Transfer) facilities
- Flexible Terms, Full Advisory Service
- International Banks
Bank guarantees are “tailor-made” transactions. One who is asked to provide a guarantee would therefore be well advised to discuss the matter first with a specialist who knows about the various regulations and practices in different jurisdictions. Global Finance Capital, Hong Kong is experts in arranging these instruments for clients, including leasing or lease bank guarantee facilities known as ‘collateral transfer’.
In many cases, it is the beneficiary who decides whether the instrument to be used should be a guarantee or a standby letter of credit. The specialist will then draft a guarantee that reflects the particular circumstances of the transaction and submit it to the client for approval. At the same time, the client will be asked to sign a letter of indemnity which states inter alia that the bank may charge the client’s account if a claim is made under the guarantee.
The bank will draft the guarantee in such a way as to protect the principal’s interests within the framework determined by the wishes of the beneficiary and the relevant regulations in the beneficiary’s country. The maximum liability (including principal, interest, charges, etc.) must be stated. It is also very important to specify a precise expiry date. Other provisions cover the procedure for making any claim.
Depending on the instructions communicated by the principal at the request of the beneficiary, the bank will either issue the guarantee itself (direct guarantee) or instruct a correspondent bank in the beneficiary’s country to do so on its behalf (indirect guarantee). A direct guarantee gives the principal more scope to influence the wording of the guarantee in accordance with its particular requirements.