Concluding a contract is always challenging. In fact, it is hard to assess the contracting partner’s risk of meeting its obligations. However, in order to secure the debtor's agreed contractual obligations this risk can be covered via an abstract bank guarantee. In this case Erste Group guarantees payment to the beneficiary in case the contracting partner fails to meet its agreed obligations.
Guarantees in foreign trade
Guarantees are common instruments to compensate financial losses caused by failures of third parties to perform according to their contractually agreed obligations. You as a beneficiary conclude a contract with Erste Group and in case your trading partner, e.g. your supplier, does not meet its agreed obligations, Erste Group guarantees you the payment.
Abstract – independent of the underlying transaction
Instrument for covering risks
Guarantees can be issued directly or indirectly via an intermediate bank to the beneficiary. In certain countries, a compulsory involvement of a local bank is legally necessary and is associated with higher costs than direct guarantees. Thus, in the case of an indirect guarantee, no legal relationship between the guarantee remitting bank and the beneficiary exists.
Types of guarantees
Tender Guarantee / Bid Bond
Advance Payment Guarantee
Retention Money Guarantee
A further instrument with the character of an abstract guarantee is a Stand-by Letter of Credit, which in its structure, however, is similar to a documentary Letter of Credit.
Erste Group supports you as ordering party as well as beneficiary of all types of guarantees. We assist you in formulating and checking wordings of guarantees.