Bank’s guarantees and suretyships
1) A bank guarantee is a written unilateral undertaking of a bank (guarantor) to pay the beneficiary the amount of money stated in the guarantee in the event that the principal (a bank customer ordering the bank to issue a guarantee) should default under his obligations secured by the guarantee.
The advising bank appears as a party of the guarantee transaction when it servers as the intermediary through which the guarantor hands the guarantee to the beneficiary (most often the advising bank is the beneficiary’s bank).
Nordea Bank Polska S.A. issues its own guarantees by order of its customers and also advises and handles guarantees issued in favour of its customers by other banks (domestic or foreign).
| Benefits for the customer (principal) from the issuance of a guarantee: |
Nordea Bank Polska S.A. issues the following types of guarantees: |
- Bid guarantee (bond)– issued to in favour of the party inviting a tender and serving as a bid deposit which according to the tender conditions must be paid by the tenderer (principal). The Bank undertakes to pay the beneficiary a specific amount of money if the tenderer who has won the contract refuses to sign the contract.
- Performance bond - issued in favour of the party ordering the execution of a contract (the beneficiary). The Bank undertakes to pay the beneficiary a defined amount of money if the event of the contractor’s (principal’s) non-performance. The amount of such a performance bonds usually represents 5-15% of the contract amount.
- Guarantee for warranty obligations (warranty bond) - issued in favour of the party ordering the execution of a contract (the beneficiary). The Bank undertakes to pay the beneficiary a defined amount of money if the event that the contractor defaulted under the warranty clause of the contract. The amount of a warranty bond usually corresponds to 30% of the performance bond.
- Advance payment guarantee – secures the reimbursement of the whole or a part of an advance payment received by the principal from the beneficiary for the delivery of goods or services which are to be delivered under a contract, if the principal defaulted under the contract and refused to return the advance payment received.
- Payment guarantee – issued in favour of the seller (beneficiary) and securing punctual payment buy the buyer for the goods or service purchased. The guarantee amount may be equal to the total amount of the contract or a part of it, that is the amount of one or more instalments in which the payment for the goods or service is to be made.
- Credit/loan repayment guarantee– secures the punctual repayment of a credit/loan if the borrower (principal) failed to discharge a part of or the whole credit/loan along with all due interest, commission and other charges under the credit/loan agreement.
- Transit guarantee – issued in favour of customs offices of the member states of the Convention of the Common Transit Procedure through the territory of which the main obligor (principal) transports goods and serving as security if the principal failed to pay customs duties, taxes or other levies relating to the transported goods in connection with a breach of the common/community transit procedure. A comprehensive transit guarantee is provided as security for more than one common/community transit procedure and is related to the regular transport of goods by the main obligor (principal), whereas a transit guarantee for a single operation secures one transit procedure.
2) Counterguarantee– when a guarantee is issued by other bank than the principal’s bank.
3) Suretyship – is a surety’s undertaking to answer to the obligee for the obligation of the obligor if he/she should fail to meet it by him/herself. The surety is obliged as a joint and several debtor. Suretyship under the civil law is given by way of a written statement by the bank addressed to the beneficiary, constituting a promise to pay a specific amount to the beneficiary. Suretyships given by banks are governed by the Civil Code. The bank’s obligation is always a pecuniary obligation.
4) The Awal is one of the types of suretyship given for the acceptor of a draft/drawer of a promissory not / another party obliged under a bill of exchange. Avals are governed by the Bill of Exchange Law.
Guarantees and suretyships are treated by Nordea Bank Polska S.A. as credit products thus the procedure related to their issuance is similar to the credit granting procedure, which requires the assessment of the customer’s creditworthiness and that the bank be provided with security to its satisfaction.
The Bank may enter into a single guarantee/couterguarantee/suretyship/aval agreement with the principal or into a master agreement stating the upper limit of the Bank’s liability under guarantees issued by order of the customer.
Nordea Bank Polska S.A. also issued guarantees and suretyships on domestic market.
The regulations governing guarantees:
* ICC Uniform Rules for Contract Guarantees UPC 325
*ICC Uniform Rules for Demand Guarantees UPC 458
Documents to download:
Application for issuing a Guarantee/Counter-Guarantee/Suretyship/Promise Rules of issuing Guarantees and Suretyships Guarantees and suretyships - tariff