Find out more about Bank Guarantee Formats, ICC Uniform Rules for Deman Guarantees (URDG 758), Cusip and ISIN, and Euroclear
A Bank Guarantee can take many different formats, however when dealing with Bank Guarantees for monetisation, the Demand Bank Guarantee is utilised. The Demand Bank Guarantee is governed by ICC Uniform Rules for Demand Guarantees, (URDG 758), and as such has a very precise and strict format, thus, when sighted by a bank, lending institution, or any other third party lender, the verbiage will leave them in no doubt that the Bank Guarantee has been issued solely for monetisation.
The International Chamber of Commerce, (ICC), has 45 million members, in over 100 countries, and sets the rules for global business, including international trade, which are in fact guidelines, but are adhered to by all major banks.
URDG 758 are a specific set of rules laid down by the ICC for the issue of Demand Bank Guarantees. Built into these rules is a specific and exact verbiage, ensuring that the Demand Bank Guarantee is utilised for the exact purpose specified. Furthermore, crystal clear wording will block any future potential litigation should any of the parties associated with the Demand Bank Guarantee try and challenge the terms of the instrument.
Under URDG 758, the Demand Bank Guarantee underpins the underlying transaction, and for whatever reason, should the Beneficiary default on their financial obligations, the lender can claim against the Demand Bank Guarantee as it is “PAYABLE ON FIRST DEMAND”.
The Cusip and ISIN codes are known globally in the financial world and are used as an identification when trading stocks, shares, futures, derivatives, bonds and other financial instruments
Cusip: Committee on Uniform Securities Identification Procedures, is an alpha numeric code used mainly in the United States of America for trading and clearing securities.
ISIN: International Security Identification Number, again is an Alpha Numeric code, used for uniform identification when trading and settling shares in derivatives, options and futures in most parts of the world, especially in Europe.
Euroclear is world’s largest international settlement platform for bonds and securities and is one of the largest securities’ depository in the world. Euroclear is alluded to here because some companies and individuals describe Euroclear as a platform for settling Bank Guarantees that may also be registered on their database. This statement is completely untrue and any business or individual that is approached by the same advising that Euroclear is a platform for settling Bank Guarantees, should be ignored.
However, Euroclear Bank, which took over Euroclear in 2001, and is a separate entity from Euroclear, is known for issuing Bank Guarantees, and this may be where any confusion has arisen.