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Bank Guarantees

Guarantees can be either direct or indirect:

A direct guarantee – when a bank is instructed to issue a guarantee by its account holder, in favour of the beneficiary. A direct guarantee is when a bank is instructed to issue a bank guarantee by its account holder in favour of the beneficiary.

An indirect guarantee – is when a second bank is asked to issue a guarantee in return for a counter guarantee. In case the second bank suffers losses in the event of claim against the guarantee, the issuing bank indemnifies any losses the second bank suffers.

Several Types of BG:

  • Bid Bond
  • Performance Bond
  • Advance Payment Guarantee
  • Warranty Bond
  • Letter of Indemnity (LOI)
  • Payment Guarantee
  • Rental Guarantee
  • Confirmed Payment Order 


The bank's guarantee to pay may be subject to conditions which stipulate that the bank shall be obligated to pay the beneficiary the a fixed promised amount on behalf of its client if the conditions are fulfilled.