Bank Guarantee

A Bank Guarantee functions as a safety net for businesses or individuals involved in contracts, ensuring that the counterparty is protected in case of non-performance, default, or non-payment. The applicant (the party requesting the guarantee) requests the bank to issue the BG, and the beneficiary (the party receiving the guarantee) can invoke the BG if the applicant fails to meet their obligations.

Bank guarantees are often used in situations where financial risks need to be mitigated, and are issued by commercial banks to cover a wide range of obligations. The amount guaranteed is typically non-recoverable and is paid by the bank in the event of a default by the applicant.