- Instrument
- Bank-to-bank guarantee
- Raised by
- Instructing bank
- Priced as
- Local issuance commission
- Structure
- Two guarantees, one obligation
Two guarantees to do one job
Many beneficiaries — government bodies especially — will only accept a guarantee issued by a bank licensed in their own jurisdiction, under their own law. When the applicant’s bank is somewhere else, the structure splits in two: a local bank issues the guarantee the beneficiary wants, and the applicant’s bank issues a counter-guarantee to that local bank.
The local bank is taking bank risk, not corporate risk, and prices accordingly. But the price still varies with the country, the instructing bank’s name, the tenor and the wording — which makes this a leg worth competing rather than routing to the same correspondent every time.
Financial institutions can leverage the platform for originating FI trade deals like counter guarantee deals from banks globally. The instructing bank posts the requirement, and banks in the right jurisdiction bid to issue.
The shape of the flow
One obligation, two guarantees. The local bank issues what the beneficiary will accept; your bank guarantees the local bank.
How it works on TradeOrigin
A bank-to-bank flow: the instructing bank raises it, local issuers bid.
Post the local issuance requirement
Jurisdiction, beneficiary, guarantee type, amount, validity and the local wording the beneficiary demands.
Local banks bid to issue
Banks licensed in that market quote their commission for issuing against your counter-guarantee, sealed from each other.
Accept and exchange undertakings
Accept a bid; the counter-guarantee and the local guarantee are recorded against the same deal.
Manage claims and expiry
Extensions, claims and release run on the platform, so both banks work from the same record.
Who it is for
Serving a client abroad
Your client has won work in a market you do not have a licence in, and you need a local issuer you can trust at a price you can justify.
Monetising a licence
You can issue where others cannot. Counter-guarantee business is bank risk, fee income and a new correspondent relationship.
Behind the structure
You see one guarantee delivered to your beneficiary; the two-bank structure that produced it is handled between the banks.
What you get
The right bank in the right country
Reach banks licensed in the jurisdiction you need rather than working through whichever correspondent you already have.
A priced leg, not a favour
Sealed bids turn a relationship call into a market price for the local issuance.
Both undertakings on one deal
The counter-guarantee and the guarantee it supports are linked, so nobody is reconciling two systems.
New correspondent relationships
Every bid is an introduction to a bank you can work with again.
What the bank will ask for
Uploaded once, against the deal, and visible only to the counterparties on it.
Questions
Who carries the risk?
The local bank looks to the instructing bank under the counter-guarantee; the instructing bank looks to its client. Each leg is documented on the deal.
Can this be arranged for a guarantee already issued?
Extensions and replacements are common. Post the existing guarantee’s terms and what needs to change.
Is URDG wording supported?
The platform carries whatever wording the two banks agree, including standard rule sets — the text sits on the deal rather than in an attachment nobody can find.
Related
Letters of Guarantee
Bid out regional and cross-border guarantees — contractual, cash-backed, zakat, SBLC and more.
ProductRisk Participation
Share trade exposure with other banks — funded or unfunded — to free up limits and spread risk.
ProductLC Confirmation
Add a second bank’s undertaking to a letter of credit, priced by banks competing for the confirmation.