Glossary

Characteristics of Bank Guarantees

Some important characteristics of Bank Guarantees should be noted:

• Bank Guarantees are written for a specific purpose: an account holder instructs their bank to issue a guarantee to another bank on their behalf.
• The bank will hold adequate assets of the account holder as security for the Bank Guarantee.
• Bank Guarantees cannot be transferred to third parties unknown to the banks. They do not carry CUSIP or ISIN numbers and are not tradable securities. They are issued for a specific time period. Upon expiry, Bank Guarantees are terminated; they are not traded. A Bank Guarantee has no end value and does not accumulate any investment element or maturity value.
  They should not be considered as ‘investment notes’. They should not be ‘touted’ on the open market as the issue of a Bank Guarantee is between closed parties (the issuer and beneficiary only). Banks do not issue them to raise money, and they should not be confused with Medium Term Notes (MTNs).
• The strength of a Bank Guarantee is limited to the financial standing (and rating) of the Issuing Bank.