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Buying Bank Guarantee

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Tue, 07/21/2009 - 18:18
niwath
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Joined: 02/16/2009
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Dear Experts,

I have a client to contact me and want me to buy his Bank Guarantee in discount amount. So I don't know how to do and can buy it or not.

Could you explain me the bank guarantee can sell or buy?

If can, what types of bank guarantee which can sell or buy?

Thanks you in advance.

Reatrey,

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Wed, 07/22/2009 - 12:55
#1
Peter M
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Joined: 09/02/2008
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Please be careful

You will be told that buying or leasing a bank guarantee or standby letter of credit is possible and normal - this is untrue.

A bank guarantee is issued by the issuing bank on behalf of their customer in favour of a beneficiary that the applicant has a business relationship with and the purpose of the guarantee is SPECIFIC to those parties and that transaction.  It is not usually transferrable and to be claimable there is normally a requirement to state the event of default.

The only exception to this is where a bill of exchange has been guaranteed by a bank through their aval endorsement - the holder of the bill through endorsement has the ability to sell this instrument through the secondary market at a discounted value based on the tenor.

Please do not be suckered into some fraudulent scheme - if you are tempted to do this, check out the guarantee intrument with your bank to ensure that it is valid and get a proper legal opion on it's enforceability in the country of issuance.

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