Bank guarantees, also known as bank letters of credit or bank bonds, play a crucial role in international trade and business transactions. This article aims to provide an overview of the key English professional terms related to bank guarantees.
A bank guarantee is a commitment made by a bank on behalf of its client, assuring that the bank will fulfill financial obligations to a third party if the client fails to fulfill the agreed terms and conditions. It serves as a security measure to minimize risks and protect the interests of all parties involved in a transaction.
The applicant, also known as the guarantor or obligor, is the individual or entity that requests the bank guarantee from the issuing bank. The applicant is obligated to fulfill all the requirements necessary for obtaining the bank guarantee and bears the responsibility for any breaches of contract.
The beneficiary, also referred to as the recipient or payee, is the individual or entity to whom the bank guarantee is issued. The beneficiary is entitled to receive the guaranteed payment by presenting the required documents and proving that the applicant has failed to fulfill their contractual obligations.
The issuing bank is the financial institution responsible for providing the bank guarantee to the applicant. The issuing bank ensures that the conditions specified in the guarantee are met and makes the payment to the beneficiary on behalf of the applicant, up to the guaranteed amount.
A counter-guarantee, also known as a counter-indemnity, is a separate guarantee issued by the beneficiary's bank in favor of the issuing bank. It provides assurance to the issuing bank that the beneficiary will not make any false claims or misuse the guarantee. The counter-guarantee acts as an additional layer of protection for the issuing bank.
The expiry date, also called the maturity date, is the deadline specified in the bank guarantee. It represents the last day on which the beneficiary can present the required documents to claim payment. If the beneficiary fails to meet this deadline, they may lose their right to receive the guaranteed payment.
