Bank guarantee
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- Manage your Bank Guarantees online with Extradeal
A Bank guarantee can give you the competitive edge you need. A bank guarantee is not a payment instrument but offers the security that an agreed obligation will be fulfilled. If it is not, the counter party will receive financial compensation. This is because the basic principle for every bank guarantee is that a bank is the guarantor.
Everything you need to know about bank guarantees
What is a bank guarantee and how does it work?
Let’s say you enter into an agreement with someone. Under this agreement, you either agree to pay for something or do something in the future. The other party to the agreement wants to be sure that they will indeed receive what they are entitled to under the agreement. A bank can then, at your request, act as guarantor and provide security for your fulfilment of the agreement. If the other party ends up claiming under the bank guarantee, the bank will pay them as per the terms of the bank guarantee. The amount the bank pays out on a guarantee will always be collected from you. under When you do business internationally, chances are that you will be asked to provide a bank guarantee. Bank guarantees are also common for transactions involving large amounts, complex projects, future obligations to deliver, and/or when dealing with a new business partner.
When we provide a bank guarantee, we will block your account/credit facility equal to the guaranteed amount.
The main features
The party that can claim the bank guarantee, i.e. generally the contractual party, is referred to as the ‘beneficiary’. By providing a bank guarantee, the bank undertakes an independent payment obligation towards the beneficiary. Whether, and if so how much, the bank has to pay out under a bank guarantee in case of a claim is determined by the text of the bank guarantee.
- A bank guarantee is an independent payment obligation towards the beneficiary; you are not a party in the payment decision.
- The bank guarantees payment of an agreed amount to the beneficiary.
- A bank guarantee is irrevocable, meaning that you cannot have a bank guarantee withdrawn and that you cannot change the amount, terms for claiming, or other details of a bank guarantee without both the bank’s and the beneficiary’s consent. Also the bank cannot amend a bank guarantee without consent of the beneficiary after it has been issued. Therefore you should bear in mind, that as soon as a bank guarantee has been issued, you are ‘tied to’ it.
- Bank guarantees generally have a fixed expiry date, but they are sometimes issued without an expiry date.
What is a claim and how does it work?
- The bank will pay the amount claimed to the beneficiary on first written demand, provided that all payment terms and conditions specified in the bank guarantee have been met. The payment will never exceed the maximum amount stated in the bank guarantee.
- The beneficiary must submit their claim in compliance with the terms of the bank guarantee.
- In assessing a claim, the bank will not take into account the terms of the agreement between you and the counter party. The bank will, in principle, only check the claim against the terms of the bank guarantee. If you do not agree with the claim on the bank guarantee, you will have to settle this with the beneficiary (afterwards). Any objection you have against the claim will alter neither the bank’s obligation to pay out under the guarantee nor your obligation to pay the amount back to the bank. Bear this in mind.
- If the claim complies with the terms of the bank guarantee, the bank will pay out the amount claimed. If the beneficiary claims only part of the maximum guaranteed amount, the guarantee will continue to apply for the remaining part, unless the beneficiary waives the guarantee for the remaining part after receiving the partial payment claimed.
List of all types of bank guarantees
Listed below are all types of bank guarantees along with standard text for each one. There is bound to be a bank guarantee on this list that is right for your situation.
- Rental guarantee
- Bid bond
- Unconditional letter of intent
- Payment guarantee/bond
- Advance payment guarantee/bond
- Performance guarantee/bond (contracted work/supply)
- Retention guarantee/bond
- Notary Guarantee
Other types of bonds/guarantees:
- Customs guarantee
- Litigation Guarantee (court surety bond)
- Missing bill of lading guarantee
- Product board guarantee
Find the full descriptions of the various types of bank guarantees.
Standard or customised
Standard
A standard bank guarantee is quick and easy to apply for online and will be issued:
- with standard guarantee text as required by ABN AMRO. The text has been drawn up with due care by product specialists and legal counsels and is generally accepted.
- in Dutch, English, German, or French language
- in the currencies EUR, USD, or GBP
- in the name of the applicant (account holder)
- directly to the beneficiary, without the involvement of a foreign bank
Customised
If you need a bank guarantee with other requirements than those listed above, you can use our customised bank guarantee.
This may be the case when, for example, the beneficiary has specific requirements for the guarantee text that differ from the standard guarantee text that ABN AMRO uses.
Fees
We charge a fee for a bank guarantee. Take a look at all our fees. (PDF, 44 KB)
Sample calculation
| Situation | |
|---|---|
| Standard or customised?: | standard bank guarantee |
| Ordered through: | online standard ABN AMRO form |
| Beneficiary (counterparty): | based outside the Netherlands |
| Guaranteed amount: | € 20.000 |
| Duration: | 1 January to 20 April |
| Guaranteed cover: | credit facility |
| Fees | |
|---|---|
| New application: | € 125 once only |
| Postage: | € 40 once only |
| Guarantee commission**: | € 50 per month |
| TOTAL for the whole term (subject to changes) | € 365 |
*The guarantee commission is 1.50% (term < 12 months) per year with a minimum of €50 per month. This is the rate that is charged if the guarantee is covered by a credit facility. The guarantee commission is 1.25% per year with a minimum of €50 per month if the guarantee is cash covered. The guarantee commission is settled on a monthly basis. Part of a month is considered a full month.
Changing a current bank guarantee
As the applicant, you can amend a bank guarantee. The following elements are sometimes amended:
- the guaranteed amount (liability)
- the guarantee duration
- the guarantee text
Please note: if the amendment is to the detriment of the counter party, we will ask their consent. You can request an amendment below.
Cancelling a bank guarantee
If you want to cancel a bank guarantee that does not have an expiry date or cancel a bank guarantee before the expiry date of the guarantee, ABN AMRO will need a waiver from the beneficiary.
By signing a waiver, the beneficiary accepts that they can no longer exercise any rights under the bank guarantee and that we are released from our obligations.
You can download a standard letter of release form (PDF, 476 KB) for this. This form can be used in most cases; check the conditions in the bank guarantee text for details. The form must be signed by the legal representative of each beneficiary involved. The form can be copied on the beneficiary’s stationary and/or bear a company stamp. The letter or waiver must also state the reference number, the amount, and the name of the beneficiary of the bank guarantee. The form must be addressed to ABN AMRO.
Cancelling a bank guarantee If you want to cancel a bank guarantee that does not have an expiry date or cancel a bank guarantee before the end of the guarantee term, ABN AMRO will need a waiver from the beneficiary. By signing a waiver, the beneficiary accepts that they can no longer exercise any rights under the bank guarantee and that we are released from our obligations.
As soon as we have received the confirmation, the beneficiary ceases to be able to exercise rights under the guarantee.
Guarantee termination on the expiry date
After the expiry date of the guarantee, we need approximately 10 days to settle this guarantee in our records. This can vary by country and bank, because it may be subject to guidelines and procedures we have to adhere to.
A direct or indirect guarantee issued under foreign law is often subject to a separate procedure. It is not always possible to close such a guarantee after the expiry date.
A guarantee/counter-guarantee can in some cases only be released once the beneficiary has returned the guarantee to the issuing bank.
Here’s how to apply for a bank guarantee
Determine if a bank guarantee is suitable in your situation
Carefully read the information above before applying.
Go through the whole checklist
Read the checklist below to find out what you will need for your application.
Complete the application online
Your answers to the first questions determine whether you can apply for a standard or a customised guarantee.
Apply for or amend a bank guarantee
Apply for a bank guarantee
The benefits at a glance
- Financial security
- Available regardless of where in the world your trade partner is based
- Easy online application process
Amend a bank guarantee
The following items are sometimes changed:
- the guaranteed amount (liability)
- the guarantee duration/expiry date
- the guarantee text
Checklist: what you will need for your application
Before you start your application for a bank guarantee, it is good to know what details you will need for it. This way you can be sure that you can fill in the application form in one go. For security reasons, the application will automatically time out after over 5 minutes of inactivity.
- Your account number
- Your company’s name as stated in the articles of association/governing document (including the legal entity type: private limited company/B.V., general partnership/V.O.F., etc.)
- The beneficiary’s name as stated in their articles of association/governing document (including the legal entity type: private limited company/B.V., general partnership/V.O.F., etc.)
- The amount of the bank guarantee
- The type of bank guarantee you want to apply for
- The goods and/or services descriptions and contract number (if applicable) from the underlying agreement for which you are applying for a bank guarantee for businesses.
Please note:
- Make sure that there is sufficient working capital available to cover the bank guarantee. This can be a credit facility or funds in your business account/business savings account. We can only execute your application if there is sufficient balance in the account(s) you specified in your application.
- The application form must be signed by the legal representatives.
International bank guarantee
You can also use bank guarantees internationally. Watch the video to see how this works.
Amending a bank guarantee online
As the applicant, you can amend a bank guarantee, such as the amount, the duration, or the guarantee text.
Contact
For more information you can call our Guarantees Service Desk on +31 (0)10 402 3700. They will be happy to help.
Convenient overview online
If you regularly use bank guarantees, discover the benefits of Extradeal.
FAQ
Can the trading partner require a specific guarantee text?
Yes, if this is the case we recommend that you submit it to us for assessment, approval, and editing to prevent yourself from signing contracts containing guarantee text that we can ultimately not accept.
If you want us to assess a guarantee text, call the Guarantees Service Desk on +31 (0)10 402 3700 (local rates apply).What costs are involved in a bank guarantee?
When you apply for a bank guarantee, you will be charged an issuing fee. In addition to that, you will be charged a guarantee commission until expiry. This fee is charged as a percentage of the guaranteed amount.
When you take out additional services, you will be charged additional fees for those. See our overview for all fees and charges (PDF, 44 KB) .
What is important when applying for a new bank guarantee?
- Read all the product information on our website. If you have any doubts, such as on what type of bank guarantee to choose, please contact our advisers.
- Make sure you have sufficient funds available. When we issue a bank guarantee, we will block your bank account/credit facility equal to the guaranteed amount.
- Make sure the application form is signed by the legal representatives.
- Make sure your application is well aligned with the underlying agreement.
- Make sure your name and your business partner’s name are entered correctly and in full. The name of your business partner (beneficiary) must match the name listed in the company register maintained by the Chamber of Commerce or similar official body.
Where to send correspondence?
Send your correspondence by courier or registered mail to the following address:
ABN AMRO Bank N.V.
Trade & Guarantees
Coolsingel 119
3012 AG Rotterdam
The Netherlands
All other correspondence should be sent to the following address:
ABN AMRO Bank N.V.
Trade & Guarantees
Postbus 949
3000 DD Rotterdam
The Netherlands
How do I apply for a bank guarantee based on my working capital?
When applying for a bank guarantee, it is important that you have sufficient working capital available to cover the bank guarantee. This working capital can be money in your current or savings account, or a loan or credit facility with the bank.
We will block the guaranteed amount until the bank guarantee expires. If you have insufficient balance to cover the bank guarantee, please contact us and ask about your options.
How do I cancel my bank guarantee?
Cancelling a guarantee before the expiry date or cancelling a guarantee without an expiry date
If you want to cancel a bank guarantee that does not have an expiry date or cancel a bank guarantee before the expiry date of the guarantee, ABN AMRO will need a letter of release form from the beneficiary. By signing this form, the beneficiary accepts that they can no longer exercise any rights under the bank guarantee and that we are released from our obligations.
You can download the letter of release form for this. This form can be used in most cases; check the conditions in the bank guarantee text for details.
The waiver must be signed by the legal representative of each beneficiary involved. The waiver can be copied on the beneficiary’s stationary and/or bear a company stamp.
The form must also state the reference number, the amount, and the name of the beneficiary of the bank guarantee. The form must be addressed to ABN AMRO.
As soon as we have received the confirmation, the beneficiary ceases to be able to exercise rights under the guarantee.
Download the letter of release (PDF, 476 KB) .
Guarantee termination on the expiry date
After the expiry date of the guarantee, we need approximately 10 days to settle this in our records. This can vary by country and bank, because it may be subject to guidelines and procedures we have to adhere to.
A direct or indirect guarantee issued under foreign law is often subject to a separate procedure. It is not always possible to close such a guarantee after the expiry date. A guarantee/counter-guarantee can in some cases only be released once the beneficiary has returned the guarantee to the issuing bank.
If you have questions about cancelling a bank guarantee, please call the Guarantees Service Desk on +31 (0)10 402 37 00 (local rates apply).
When will ABN AMRO release the blocked guaranteed amount?
We will release the blocked guaranteed amount:
- after the expiry date of the bank guarantee; or
- when we have received a letter of release from the beneficiary. With a letter of release the beneficiary cancels a bank guarantee without expiry date or cancels a bank guarantee before the expiry date.
What are 'correspondent bank fees'?
If the bank guarantee is issued by another bank (a ‘correspondent bank’) at the request of and with a counter-guarantee issued by ABN AMRO, you will also be charged for the correspondent bank’s commission and fees.
How much you will be charged for in correspondent bank commission and fees depends on the type of guarantee, the duration, the local bank, and the country.
What is the difference between a direct and an indirect bank guarantee?
Direct bank guarantee issued by ABN AMRO to the beneficiary:
ABN AMRO issues the bank guarantee. The beneficiary can, if necessary, claim the guaranteed amount from ABN AMRO.
Direct bank guarantee – Advising through another bank:
in case of an advice guarantee, the correspondent bank verifies the authenticity of the bank guarantee issued by ABN AMRO and advises the the bank guarantee to the beneficiary without any liability towards the beneficiary.
Indirect bank guarantee
The bank guarantee is issued by a local correspondent bank abroad at ABN AMRO’s request as per your instruction. The beneficiary can claim the guaranteed amount from the local correspondent bank.
Please note! You will be charged for the correspondent bank’s fees.
If you choose ABN AMRO’s standard wording for the bank guarantee, we will ask the local correspondent bank to use their standard wording.
What is a third-party guarantee?
When you apply for a bank guarantee on another party’s behalf, we are dealing with a third-party bank guarantee. In this situation, the bank guarantee is issued in a name other than that of the account holder on whose account the bank blocks the guarantee amount.