Bank guarantee

The bank guarantee is an irrevocable obligation of the bank to pay the beneficiary a certain amount of money, if the results of the transaction were not as expected or are not fulfilled agreed obligations by the third party. The bank guarantee is part of the contract concluded between a seller and a buyer, it is a separate obligation, legally independent from the principal or the relationship under the contract between the creditor and the main debtor. Payments under the guarantee requires submission to the bank by the beneficiary the statement on the obligations under the contract are not met or not fully met by the applicant of guarantee and the beneficiary has right to get a certain amount of money.

Fees for bank guarantees:

  • Below 100% cash collateral to 4% per year (according to the decision of the credit committee) at least 100 Somoni
  • Under the property collateral or surety to 12% per year (according to the decision of the credit committee) at least 100 Somoni

Typical causes for claims of guarantees:

  • The situation prevailing in the country of the buyer;
  • Seller or the person who wins the tender, are unknown to the buyer, and as a consequence there is no trust between them.
  • The size or value of the contract is that the buyer / seller wants to protect itself by producing a bank guarantee against losses that may occur due to the failure by the seller / buyer of its contractual obligations.

The main types of guarantees in international trade:

  • Bid Security (Bid Bond)
  • Performance Security (Performance Bond)
  • Warranty advance payment (Advance Payment Guarantee)
  • Guarantee of Payment (Payment Guarantee)