Bank Guarantee
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A Bank Guarantee offers you the security that an agreed obligation will be fulfilled. If not, you still get paid. This is because the basic principle for every Bank Guarantee is that a bank is the guarantor.
Everything you need to know about Bank Guarantees
What is a Bank Guarantee?
Let’s say you enter into an agreement with someone to pay for something or do something in the future. The other party to the agreement wants to be sure that they will indeed receive what they are entitled to under the agreement. A bank can then, at your request, act as guarantor and provide security for your fulfilment of the agreement. If the other party ends up claiming under the Bank Guarantee, the bank will pay them as per the terms of the Bank Guarantee. The amount the bank pays out on a guarantee will always be collected from you.
Bank Guarantees are common when you do business internationally. Also for transactions involving large amounts, complex projects, future obligations to deliver, and/or when dealing with a new business partner.
When we provide a Bank Guarantee, we will block your account equal to the guaranteed amount.
The main features
The party that can claim the Bank Guarantee, i.e. generally the contractual party, is referred to as the ‘beneficiary’. The bank undertakes a payment obligation towards the beneficiary.
- A Bank Guarantee is an independent payment obligation towards the beneficiary. You are not a party in the payment decision.
- The bank guarantees payment of an agreed amount to the beneficiary.
- A Bank Guarantee is irrevocable. This means that you cannot have a Bank Guarantee withdrawn. You can only change the amount, terms for claiming, or other details of a Bank Guarantee with both the bank’s and the beneficiary’s consent. Also the bank cannot amend a bank guarantee without consent of the beneficiary after it has been issued. Therefore you should bear in mind, that as soon as a Bank Guarantee has been issued, you are ‘tied to’ it.
- Bank Guarantees generally have a fixed expiry date. Sometimes they are issued without an expiry date.
Standard or customised
Standard
A standard Bank Guarantee is quick and easy to apply for online.
- With standard guarantee text. The text has been drawn up with due care by product specialists and legal counsels and is generally accepted.
- In Dutch, English, German, or French language.
- In the currencies EUR, USD, or GBP.
- In the name of the applicant (account holder)
- Directly to the beneficiary, without the involvement of a foreign bank.
Customised
If you need a Bank Guarantee with other requirements than those listed above, you can use our customised bank guarantee. This may be the case when, for example, the beneficiary has specific requirements for the guarantee text that differ from our standard guarantee text.
All types of Bank Guarantees
We have listed all types of Bank Guarantees. There is bound to be a Bank Guarantee on this list that is right for your situation.
Fees
We charge a fee for a bank guarantee. Take a look at all our fees.
Sample calculation
| Situation | |
|---|---|
| Standard or customised?: | standard Bank Guarantee |
| Ordered through: | online standard ABN AMRO form |
| Beneficiary (counterparty): | based outside the Netherlands |
| Guaranteed amount: | € 20.000 |
| Duration: | 1 January to 20 April |
| Guaranteed cover: | credit facility |
| Fees | |
|---|---|
| New application: | € 125 once only |
| Postage**: | € 40 once only |
| Guarantee commission*: | € 50 per month |
| TOTAL for the whole term (subject to changes) | € 365 |
*The guarantee commission is 1.50% (term < 12 months) per year with a minimum of €50 per month. This is the rate that is charged if the guarantee is covered by a credit facility. The guarantee commission is 1.25% per year with a minimum of €50 per month if the guarantee is cash covered. The guarantee commission is settled on a monthly basis. Part of a month is considered a full month.
**In this sample calculation, the guarantee is sent directly to the beneficiary abroad.
Amend a Bank Guarantee
As the applicant, you can amend a Bank Guarantee.
- The guaranteed amount (liability).
- The guarantee duration.
- The guarantee text.
Please note: if the amendment is to the detriment of the counter party, we will ask their consent.
Cancelling a Bank Guarantee
Would you like to cancel a Bank Guarantee that does not have an expiry date or cancel a Bank Guarantee before the expiry date of the guarantee? We will need a waiver from the beneficiary. By signing a waiver, the beneficiary accepts that they can no longer exercise any rights under the Bank Guarantee and that we are released from our obligations.
As soon as we have received the confirmation, the beneficiary ceases to be able to exercise rights under the guarantee.
Download a standard letter of release form for this. Please check the conditions in the bank guarantee text for details. The form must be signed by the legal representative of each beneficiary involved.
Guarantee termination on the expiry date
After the expiry date of the guarantee, we need approximately 10 days to settle this guarantee in our records.
A direct or indirect guarantee issued under foreign law is often subject to a separate procedure. It is not always possible to close such a guarantee after the expiry date.
A guarantee/counter-guarantee can in some cases only be released once the beneficiary has returned the guarantee to the issuing bank.
If you have any questions, please call our Trade Finance Operations on +31 (0)10 402 37 00 (local rates apply).
Checklist for your application
You will need these details to start your application for a Bank Guarantee. Now you can fill in the application form in one go.
- Your account number.
- Your company’s name as stated in the articles of association/governing document (including the legal entity type: private limited company/B.V., general partnership/V.O.F., etc.).
- The beneficiary’s name as stated in their articles of association/governing document (including the legal entity type: private limited company/B.V., general partnership/V.O.F., etc.).
- The amount of the bank guarantee.
- The type of Bank Guarantee you want to apply for.
- The goods and/or services descriptions and contract number (if applicable) from the underlying agreement for which you are applying for a Bank Guarantee for businesses.
Please note:
- Make sure that there is sufficient working capital available to cover the Bank Guarantee. This can be a credit facility or funds in your business account. We can only execute your application if there is sufficient balance in the account(s) you specified in your application. Funds within the Trade Finance Cover Account are securely blocked until the Bank Guarantee expires.
If you want to use funds in your business account to cover the Bank Guarantee, you need to have a Trade Finance Cover Account. If you do not yet have a Trade Finance Cover Account, we will open one for you. We open the Trade Finance Cover Account in principle in the same currency as the Bank Guarantee. If you would prefer the cover account not to be opened in the same foreign currency as the Bank Guarantee, or if we are unable to open it in that foreign currency, we will open the account in euros. Find out more about the Trade Finance Cover Account. - The application form must be signed by the legal representatives.
Here’s how to apply for a Bank Guarantee
Determine if a Bank Guarantee is suitable in your situation
Carefully read the information above before applying.
Go through the whole checklist
Read the checklist above to find out what you will need for your application.
Complete the application online
Your answers to the first questions determine whether you can apply for a standard or a customised guarantee.
Request to apply for a Bank Guarantee
The online forms are only available in Dutch. Do you need an English form? Please contact our Trade Finance Operations on + 31 (0)10 402 3700.
Due to high demand, there is currently a longer processing time for requesting and issuing a Bank Guarantee than you are used to from us. We apologize for the inconvenience.
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Video: International Bank Guarantee
You can also use Bank Guarantees internationally. Watch the video to see how this works.
FAQ
Can the trading partner require a specific guarantee text?
Yes, if this is the case we recommend that you submit it to us for assessment, approval, and editing. Prevent yourself from signing contracts containing guarantee text that we can ultimately not accept.
If you want us to assess a guarantee text, call Trade Finance Operations on +31 (0)10 402 3700 (local rates apply).
Where to send correspondence?
Send your correspondence by courier to the following address:
ABN AMRO Bank N.V.
Trade Finance Operations
Coolsingel 131-133
3012 AG Rotterdam
The Netherlands
All other correspondence should be sent to the following address:
ABN AMRO Bank N.V.
Trade Finance Operations
Postbus 949
3000 DD Rotterdam
The Netherlands
How do I apply for a Bank Guarantee based on my working capital?
When applying for a Bank Guarantee, it is important that you have sufficient working capital available to cover the Bank Guarantee. This working capital can be money in your current or savings account, or a loan or credit facility with the bank.
We will block the guaranteed amount until the Bank Guarantee expires. If you have insufficient balance to cover the Bank Guarantee, please contact us and ask about your options.
What is a claim and how does it work?
- The bank will pay the amount claimed to the beneficiary on first written demand. Provided that all payment terms and conditions specified in the Bank Guarantee have been met. The payment will never exceed the maximum amount stated in the Bank Guarantee.
- The beneficiary must submit their claim in compliance with the terms of the Bank Guarantee.
- In assessing a claim, the bank will not take into account the terms of the agreement between you and the counter party. The bank will, in principle, only check the claim against the terms of the Bank Guarantee. If you do not agree with the claim on the Bank Guarantee, you will have to settle this with the beneficiary (afterwards). Any objection you have against the claim will alter neither the bank’s obligation to pay out under the guarantee nor your obligation to pay the amount back to the bank. Bear this in mind.
- If the claim complies with the terms of the Bank Guarantee, the bank will pay out the amount claimed. If the beneficiary claims only part of the maximum guaranteed amount, the guarantee will continue to apply for the remaining part. Unless the beneficiary waives the guarantee for the remaining part after receiving the partial payment claimed.
When will ABN AMRO release the blocked guaranteed amount?
We will release the blocked guaranteed amount:
- after the expiry date of the Bank Guarantee; or
- when we have received a letter of release from the beneficiary. With a letter of release the beneficiary cancels a Bank Guarantee without expiry date or cancels a Bank Guarantee before the expiry date.
What are 'correspondent bank fees'?
Is the Bank Guarantee issued by another bank (a ‘correspondent bank’) at the request of and with a counter-guarantee issued by us? You will also be charged for the correspondent bank’s commission and fees.
How much you will be charged for in correspondent bank commission and fees depends on the type of guarantee, the duration, the local bank, and the country.
What is the difference between a direct and an indirect Bank Guarantee?
Direct Bank Guarantee issued by ABN AMRO to the beneficiary:
We issue the Bank Guarantee. The beneficiary can, if necessary, claim the guaranteed amount from us.
Direct Bank Guarantee – Advising through another bank:
In case of an advice guarantee, the correspondent bank verifies the authenticity of the bank guarantee issued by us. And advises the Bank Guarantee to the beneficiary without any liability towards the beneficiary.
Indirect Bank Guarantee
The Bank Guarantee is issued by a local correspondent bank abroad at our request as per your instruction. The beneficiary can claim the guaranteed amount from the local correspondent bank.
Please note! You will be charged for the correspondent bank’s fees.
If you choose our standard wording for the Bank Guarantee, we will ask the local correspondent bank to use their standard wording.
What is a third-party guarantee?
When you apply for a Bank Guarantee on another party’s behalf, we are dealing with a third-party Bank Guarantee. In this situation, the Bank Guarantee is issued in a name other than that of the account holder on whose account the bank blocks the guarantee amount.