Guarantees

Bank guarantee

A bank guarantee is an instrument popular worldwide that secures payments or substitutes the cash deposit.

JSC “NORVIK BANKA” offers its customers the opportunity to use the following services:

  • guarantees in favour of domestic and foreign beneficiaries who are the business partners of our customers;
  • counter-guarantees issued in favour of a foreign correspondent bank which issues its own guarantee to a foreign partner of our customer;
  • advising on a guarantee issued by foreign banks in favour of our customers;
  • making a demand under the guarantee accepted by our customer (beneficiary).

Learn more:

> Bank tariffs on Guarantees

Types of guarantees

Payment guarantee

Payment guarantees are issued to secure the payment obligations of the buyer (importer) towards the seller. The exporter delivers the goods on the basis of a deferred payment, but his/her risk is secured by a bank guarantee. The importer has an opportunity to postpone the settlement for the delivered goods.

Advance payment guarantee

An advance payment guarantee is issued on the exporter’s (seller’s) request and secures any claims by the buyer against the seller for reimbursement of the buyer’s down payment in cases where the seller is in breach of its obligations to supply the goods under the contract.

Tender guarantee / bid bond

A tender guarantee is mainly used by tenderers under invitation to tender for a project. A tender guarantee substitutes the cash deposit.

Performance guarantee / bond

Performance guarantee is issued in order to secure proper delivery or performance under the terms of the contract. The most commonly performance guarantees are used in construction companies.

Guarantee for warranty obligations

A guarantee for warranty obligations secures any demand for payment against the manufacturer during the defects liability period.

Important information

What type of guarantee do you need?

If a bank guarantee is required under the terms of a commercial contract or a tender invitation, you certainly need a payment guarantee or a tender guarantee.

Which bank shall issue the guarantee?

The guarantee can be issued by JSC “NORVIK BANKA” or a foreign bank.

What type of security does the bank accept?

Since the guarantee is a credit instrument, the issuing bank evaluates the potential credit risk, and therefore asks for security. The bank accepts cash cover, assets of the companies pledged to the name of the bank, sureties, etc

How to apply for a guarantee

1. The client fills in file_pdfthe Bank guarantee application form ( or file_pdfthe Bank guarantee application form for non-residents) and submits it to the bank.

2. Upon a positive decision for the issuing of the requested guarantee, the Bank will ask the client to sign:

  • Guarantee Agreement stipulating the terms and conditions on issuing of a guarantee
  • Pledge Agreement

3. The Bank hands the Letter of Guarantee to the customer’s representative or transmits it to a foreign bank by SWIFT for further delivery to the beneficiary.

Counter-guarantees

JSC “NORVIK BANKA” issues a counter-guarantee to a foreign correspondent bank asking to issue its own guarantee in favour of a foreign partner of our customer. Thus the foreign business partner receives the guarantee from his local bank. In the event case of a claim the beneficiary asks for the payment directly from his bank. In turn, JSC “NORVIK BANKA” shall be responsible to the foreign bank under its counter-guarantee.

Advising on guarantees

JSC "NORVIK BANKA” advises on guarantees issued by other banks without any obligations on its part. The bank also authenticates the document which is handed over to the customer. Upon the customer’s request the bank informs about the potential risks to the beneficiary and the procedure of claiming, if any.

Making a demand upon request of a beneficiary

At the request of the beneficiary JSC “NORVIK BANKA” examines the terms of the guarantee and makes a demand via SWIFT to the issuing bank. In this case JSC “NORVIK BANKA is responsible only for the accuracy of the demand, but does not ensure the payment under the demand.