A bank guarantee is an irrevocable commitment by a bank to pay a specified sum in the event that the party requesting the guarantee fails to perform the liability secured by the document.
A guarantee is a commitment independent of the liability under the principal debt or the agreement between the creditor and the primary debtor. By issuing a guarantee, a bank commits to pay upon first demand, provided all the conditions stipulated in this guarantee are met.
VTB Bank issues all forms of guarantees and stand-by letters of credit requiring cash settlement on a broad range of transactions upon the request of clients, Russian banks and foreign correspondent banks.
1) Bank guarantees common in Russian and international banking:
- performance guarantees;
- advance payment guarantees;
- contractual payment guarantees;
- bid guarantees;
- loan guarantees.
2) Bank guarantees stipulated by Russian law:
- bank guarantees in favour of the customs authorities;
- bank guarantees in favour of the tax authorities, including bank guarantees to pay tax arrears with penalties if the taxpayer has recovered VAT;
- federal special stamp guarantees;
- share payment guarantees;
- performance guarantees for tourist product sales agreements.
In addition to regular bank guarantees, VTB Bank also issues counter indemnity.
The bank offers other types of guarantee operations:
- advises guarantees and stand-by letters of credit issued by Russian and foreign banks in favour of Russian and foreign beneficiaries;
- claims payments from guarantor banks upon the beneficiaries’ requests under bank guarantees and stand-by letters of credit;
- certifies the authenticity of signatures on guarantees issued by other banks upon the request of clients.
Guarantee transactions are performed in accordance with the applicable Russian legislation, international banking practices, Uniform Rules for Demand Guarantees (ICC Publication No 458), and VTB Bank regulations. Please ask our staff for more information about the procedures for issuing guarantees, as well as product descriptions and usage guidelines.
Bank guarantee forms and examples of completed forms
Documents required for applying for a bank guarantee from VTB Bank:
- three copies of the offer/application form. The examples available via the above link can be used as guides when filling out the form. The offer/application should be printed on a company letterhead, signed by the authorised executives, and stamped. The signature and the stamp must correspond with the sample signature and stamp on the signature card held at the bank;
- a completed guarantee form signed by the chief executive and the chief accountant with the company stamp;
- an authenticated copy or draft of the contract or trading terms.
The client can be asked to produce further documents, such as documents confirming the client’s legal capacity and the authority of its executives, and financial statements. If the client is a joint stock company, and the deal is large, the bank may ask the client to produce copies of valid documents confirming that the guarantee transaction has been approved in accordance with the relevant corporate procedure stipulated in its statutes.
In compliance with Article 18 of the Federal Law on State and Municipal Unitary Enterprises No 161-FZ dated 14 November 2002, a state company cannot conclude bank guarantee deals without the owner’s consent. Thus, if the client is a unitary enterprise, it will need to produce the owner’s consent.