International Bank Guarantees
Standby Letters of Credit
Standby letters of credit are security instruments that serve as a guarantee that an obligation will be duly fulfilled at maturity or, failing such fulfillment, that payment will be made.
Guarantees and Counter-Guarantees
Foreign guarantees (external guarantees / bank guarantee letters) are undertakings that provide a bank’s assurance that a certain obligation or payment will be performed. Guarantee letters are instruments designed to protect the party in whose favor they are issued.
A counter-guarantee is used where a guarantee is required to be issued abroad. Rather than issuing the guarantee directly, the principal’s bank instructs a correspondent bank, usually the beneficiary’s local bank, to issue the guarantee in favor of the beneficiary, thereby allowing the beneficiary to rely on the undertaking of its own bank.
Parties to a Guarantee
- Guarantor: The bank issuing the guarantee
- Beneficiary: The party in whose favor the guarantee is issued
- Principal: The party whose obligation or performance is being guaranteed
- Counter-Guarantor Bank: The bank that issues a counter-guarantee to the guarantor bank, namely the beneficiary’s bank, which will issue the guarantee letter to the beneficiary.
Types of Guarantee Letters
- Tender Guarantee veya Bid Bond:
These are guarantees issued in favor of a bidding company and addressed to the tendering authority. They entitle the tendering authority to claim compensation in the event that the bidder fails to comply with the tender conditions
- Performance Guarantee:
These are guarantees that entitle the beneficiary to claim compensation in the event that the obligation undertaken by the principal is partially or fully not performed in accordance with the terms and conditions of the contract executed between the parties.
- Advance Payment Guarantee:
These are guarantees that entitle the beneficiary to claim reimbursement of the advance payment made to the principal in the event that the underlying contractual obligations are not fulfilled.
- Payment Guarantee:
These are guarantees that secure the buyer’s payment obligation toward the seller arising from a sales contract between the parties.
Warranty Guarantee:
These are guarantees issued to ensure that the goods delivered under the contract remain sound, defect-free, and fully operational for the period specified in the contract.
- Retention Guarantee:
These are guarantees issued pursuant to the contract executed between the parties, to ensure full payment for the goods or services delivered without any deductions that may otherwise be applied by the applicant, by securing the employer against potential defects or issues that may arise in the delivered goods or services.
Through Türk Eximbank’s extensive correspondent banking network, you may benefit from our Bank’s foreign trade services for your letter of guarantee requests, including the issuance of guarantees either directly or under counter-guarantee structures, within the framework of your approved credit limits.
You may let your applications reach us via our branches.