An external guarantee letter is a document of guarantee in which a bank undertakes to pay the beneficiary in the event that a certain debt or obligation is not fulfilled. This is used especially in international trade to secure the fulfillment of contracts.
In the guarantee letter, the parties are:
- Guarantee provider: Guarantor Bank (Guarantor)
- Guarantee beneficiary: Addressee (Beneficiary)
- Guaranteed action: Principal (Principal)
In our Bank, external guarantee letters can be issued in 3 ways:
- Wet-signed direct letter: Letters that are arranged by our Bank in paper form and signed in wet ink.
- Notification letter: Letters arranged by our Bank in the SWIFT environment and transmitted to the correspondent bank determined by the companies, which are notified to the addressee without the correspondent bank assuming any responsibility.
- Counter-guaranteed letter: It is used in cases where the addressee company demands the guarantee of a bank established in its own country instead of the direct guarantee of a bank established abroad. In this case, the correspondent bank is given the authority to arrange its own letter addressed to the addressee under the guarantee of our Bank. In this way, letters in which more than one bank assumes risk are counter-guaranteed letters.
Advantages:
- Ensures the security of commercial contracts.
- Guarantees that the importer or exporter will fulfill their commitments.
- Increases reliability from the perspective of the other party.
- Creates reputation and trust in business relationships.