Demand Guarantee check0 / 1 answered · 0 correct
Check 1
In an indirect guarantee structure, how many undertakings can exist?
Counter-Guarantees and Local Guarantees
Learn why two banks may issue two separate undertakings in an indirect structure.
Why indirect guarantees exist
A beneficiary may want a guarantee from a local bank. The applicant’s bank can issue a counter-guarantee to that local bank, which then issues the guarantee to the beneficiary.
Two undertakings
The local guarantee and counter-guarantee are separate independent undertakings. Their amounts, expiry dates, demand requirements and governing rules need to be coordinated but are not literally one document.
Bank-to-bank risk
The local guarantor takes risk on the counter-guarantor and the structure. Fees, collateral and compliance may therefore involve both banks.
Practical timing
A counter-guarantee often needs enough extra time beyond the local guarantee to allow a demand to move through the chain. Exact requirements depend on the banks and wording.
Remember thisIndirect guarantee = local guarantee plus a separate counter-guarantee; never assume one automatically mirrors the other perfectly.
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