Exchange of goods and services in the international market is a rather complex and risky process: turnover of goods and financial resources takes place outside the borders of the country and often is connected with concerns, whether the buyers and the sellers are able to fulfill their commitments. SEB Bank Guarantee / Bank Pledge (as well as Letter of Credit or Documentary Collection) will diminish your company import or export transaction risks significantly and will provide guarantees for both exporters and importers of goods. In case of a Bank Guarantee, the bank undertakes to pay the recipient of the Guarantee a certain amount of money, if transaction partner, who has requested the bank to issue such a guarantee, has not fulfilled its obligations.
Bank guarantee is bank's irrevocable commitment to pay to the recipient of the Guarantee (third party) money up to the maximum amount set in the Guarantee, if the requestor of the Guarantee does not fulfill its obligations. Fulfillment of obligations is first required from the requestor of the Guarantee, and the Guarantee is to be used only if the requestor is not fulfilling obligations. In this case the bank, based on the issued Guarantee, pays out the agreed amount to the recipient of the Guarantee (third party) immediately.
In case of bank pledge the bank makes the payment if in addition to request from Guarantee recipient it has also received Guarantee requestors consent or a court ruling that such a payment must be made. In case of the first request the bank makes a payment, if Guarantee recipient has submitted the first written request that corresponds to the conditions of the Guarantee.
The bank can issue Guarantee for a variety of commitments, for instance, for fulfillment of tender offer, payment or pre-payment, for payment of fulfilling agreement conditions, advance payment, loan, rental commitments, tax return etc. The smallest SEB bank issued international guarantee amount has been 30 EUR.
Guarantees are fully independent transaction from agreements or offers that they are based on or that are mentioned in the Guarantee – all sides involved in the Guarantee are operating only with documents, not with respective transaction goods or services. Guarantees are a secure and internationally recognized means – its operations are regulated by rules of International Chamber of Commerce "On request guarantees" (URDG 758) and respective normative documents of the Republic of Latvia.
For diminishing transaction risks you can also choose to use other SEB bank services – Letter of Credit or Documentary Collection. From the three mentioned services the most often used is a Pledge.
Read more about a Letter of Credit
Read more about Documentary Collection
Documentary Collection |
Letter of Credit |
Bank Guarantee /Pledge |
---|---|---|
Type of payment |
Type of payment |
Instrument for limiting risk |
Payment for trading documents |
Payment for trading documents |
Takes place without making a payment |
Documents are not returned to the buyer without payment or pledge to pay for goods within a certain time frame |
Documents are not returned to the buyer without payment or pledge to pay for goods within a certain time frame |
Documents can be requested only in case of guarantee payment
|
Bank does not have a commitment to pay |
Bank has a commitment to pay |
Bank has a commitment to pay |
Most often used are Payment guarantee and Tender guarantee but the bank can issue Guarantees for fulfillment of different types of agreement obligations (for instance, payment, advance payment, agreement fulfillment, guarantee term, credit obligations, rent agreement obligations, tax re-payment obligations etc.).
Buyer and seller conclude a purchase-sales agreement, in which they agree that buyers payment commitments are guaranteed by the bank Guarantee.
Buyer submits Guarantee request on behalf of seller in the bank.
Buyer's bank issues Letter of Guarantee and mails or delivers it electronically to the seller's bank. If the buyer chooses a Guarantee corresponding to local legislation and in local language, the buyer's bank issues its counter-guarantee to the sellers bank, and after it has been received, the sellers bank, in accordance with buyer's bank conditions will issue to the seller Letter of Guarantee
Seller in accordance with the agreement, sends goods to the buyer, and submits to the buyer necessary documents and requests to make a payment in the term stated in the agreement.
If buyer pays to the seller on the term agreed, the Guarantee is not used.
If buyer does not pay to the seller on time, seller, based on Guarantee, submits a written request to the bank to pay the amount that has not been paid by the buyer.
Buyers bank checks the request and pays the respective amount to the seller.
Buyer's bank informs buyer about the submitted request. Buyer pays the set amount to its bank.
In force from | In force to | |
---|---|---|
Guarantee application |
30.05.2019
|
In force
|
Confirmation application |
30.05.2019
|
In force
|
Guarantees provisions |
30.05.2019
|
In force
|
Services | Fees |
---|---|
Guarantee line1 | |
Processing a guarantee line, increasing the limit | 0,5%, min 150.00 EUR |
Term prolongation for a guarantee line | 0,2%, min 150.00 EUR |
Other changes to the guarantee line agreement upon the customer's request | 0,5%, min 50.00 EUR |
Guarantees/International guarantees/Stand-by letters of credit |
|
Issuance of Guarantee/Stand-by letter of credit: | |
• type of collateral: cash cover in SEB bank | 0,3%, min 120.00 EUR |
• within the scope of the Guarantee line | By agreement, min 70.00 EUR |
• another collateral | 1%, min 190.00 EUR |
Extra commissions charged for issuance of a Guarantee/Stand-by letter of credit: | |
• issuance of the Guarantee in accordance with the template provided by the customer | 15.00 EUR |
• urgent issuance of a Guarantee within 8 working hours2 | 70.00 EUR |
• processing of a non-standard Guarantee template and the approval thereof | By agreement, min 70.00 EUR |
Guarantee utilisation fee (depending on the type of collateral): | |
• type of collateral: cash cover in SEB bank | Min 1% per year, min 70.00 EUR |
• another collateral | By agreement, min. 70.00 EUR |
Amendment/cancellation of a Guarantee upon the customer’s request | 70.00 EUR |
Notification of a Guarantee/Stand-by letter of credit issued by another bank | 85.00 EUR |
Notification changes to a Guarantee/Stand-by letter of credit issued by another bank | 70.00 EUR |
Verification of the authenticity/cancellation/processing of other information of a Guarantee issued by another bank upon the customer’s request | 100.00 EUR |
Processing/certifying the signatures/forwarding the claim on behalf of the customer3 | 0,2%, min 145.00 EUR |
Payment of a received claim | 0,25%, min 145.00 EUR |
Confirmations |
|
Confirmation of issuance of a guarantee | 70.00 EUR |
A certificate of the possible issuance of a guarantee | 30.00 EUR |
Changes to the provisions of the confirmation at the customer's request | 30.00 EUR |
Additional services |
|
Processing and forwarding information of financial transactions on behalf of the customer | 30.00 EUR |
Preparation of agreement and collateral agreements in electronic format | Free of charge |
Preparation of agreement and collateral agreements in paper format | 35.00 EUR |
Authorisation to receive goods addressed to the bank | 70.00 EUR |
Costs of courier services | Actual costs |
Commissions charged by correspondent and cooperation banks | Actual costs |
Verification of counterparties involved into deal (applicable for deals with high risk countries)* | 45.00 EUR |
1 The commission fee must be paid on the day the agreement or amendments are signed.
2 Subject to the decision made by SEB bank and concluding the relevant agreement with the customer. The standard term for issuing a Guarantee is laid down in the Terms and Conditions of the Guarantee.
3 Application for processing and sending a claim should be submitted to SEB bank at least 3 business days prior to the Guarantee expiry date.
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