Guarantees

• contracting parties seek assurance that the counter party isable to perform its commitments in accordance with the contract terms
• banking practice recognises several ways of securing fulfillment of its business partner’s liability
• security (guarantee) is used for securing other liability: a guarantee is able to cover any risks (insolvency, unwillingness of a debtor/buyer, or failure of a supplier to perform its contractual obligations),
• guarantee represents a unilateral legal act of the bank. After the beneficiary receives the guarantee and any modification to the guarantee, or revocation/cancellation of the liability is subject to the beneficiary’s consent.

VUB bank provides the following types of guarantees securing clients’ liabilities:

• bank guarantee,
• stand-by Letter of Credit,
• custom bond,
• guarantee to secure excise tax on mineral oils.

In addition to guarantees, the bank provides also letter of indemnity, by which the promiser (bank) assumes liability to the promisee for indemnification of any damages incurred in consequence of its conduct required by the promiser, if such conduct is not mandatory (e.g. a shipper is not obliged to release the goods without presentation of the original Bill of Lading. If the shipper releases the goods upon request of the consignee/consignor who has lost the document, it assumes the risk that the original Bill of Lading will be presented by a third party, which will be then entitled to settlement as owner of the consignment).

Terms and conditions for providing of guarantee

• proveneconomic return of the deal - i.e. proving  client’s capability to perform its contractual obligations, pay the price for the guarantee, and refund the bank the full amount of any payments made under the guarantee;
• specific-purpose of the deal - the bank shall issue a guarantee only for the specific purpose indicated in client’s application for a guarantee, which must be related to client’s scope of business activity;
• the bank shall not provide any guarantees related business which constitutes breach of public order, good morals, or  environmental damages;
• security of the deal - the guarantee and applicable refunds must be adequately secured, and forms of such security must be legally incontestable and effective as of the date of guarantee provision. Instruments used by the bank for securing its trade receivables include:
  • guarantee of a creditworthy bank,
  • guarantee of the SR government,
  • disposal restrictions imposed on the client’s deposit accounts kept with VÚB,
  • pledge over immovable assets,
  • pledge over movable assets, securities or receivables,
  • third party guarantee,
  • receivable assignment.
• guarantee applications submitted by entrepreneurs must be executed in writing
• documents supporting a guarantee application:
  • up-to-date extract from the Commercial Register or trade certificate,
  • financial statements,
  • business plan,
  • deal security documents,
  • documents related to the purpose of the deal (contract),
  • other documents as required by the bank depending on its knowledge of the client, type, amount and duration of the required guarantee