bankgarantie

A bank guarantee, sometimes written as bankgarantie in some languages, is a formal commitment issued by a bank on behalf of a client (the applicant) to a third party (the beneficiary) to guarantee payment of a specified amount if the applicant fails to meet contractual obligations or other duties. Bank guarantees are commonly used in international trade, construction projects, government bidding, and performance arrangements.

Common types include payment guarantees, performance guarantees, and advance payment or bid guarantees. A payment guarantee covers payment of a debt or liability; a performance guarantee ensures completion or satisfactory performance; a bid guarantee secures participation in a tender.

Operation: the applicant requests the bank to issue a guarantee, which is typically irrevocable. The beneficiary can draw on the guarantee by presenting a demand in line with the terms (often a statement of non-performance or default), subject to documentary evidence. The bank pays up to the guaranteed amount and then seeks reimbursement from the applicant. Guarantees have expiry dates and claim periods; claims must be presented within the period stated in the instrument.

Relation to other instruments: guarantees are usually separate from the underlying contract and are governed by rules such as the ICC's Uniform Rules for Demand Guarantees. They are different from letters of credit, which are payment mechanisms tied to documentary compliance. Costs include issuance or commitment fees and renewal fees. Risks include credit risk for the bank and financing costs for the applicant; for beneficiaries, risks include improper claims or misinterpretation of terms.