Letter of Guarantee

Glossary

Banking

Letter of Guarantee

Bank guarantees come in a variety of forms and are widely used in business, trade, corporate financing, project and infrastructure finance and wherever a counterparty needs to eliminate or minimise credit risk. The main purpose of a bank guarantee is to cover losses if a business venture, project or transaction fails to perform. As such, the bank guarantor, in return for a guarantee fee, is exposed to payment risks involved in the venture or project.

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