A guarantee is an efficient solution FNB customers can use to enable trust between two parties in a transaction. The guarantee replaces the need for one party to provide another form of security such as cash.
A Local Guarantee is where a guarantee is issued to a beneficiary in South Africa, whereas a Foreign Guarantee is where a guarantee is issued to a beneficiary outside of South Africa.
FNB can issue guarantees directly to foreign beneficiaries or indirectly to foreign beneficiaries via a foreign bank.
It replaces the need to provide other forms of security (such as a cash deposit), as the beneficiary knows they will be paid.
The security (such as a cash deposit) can be invested in an interest-bearing account.
As the beneficiary relies on the guarantee, the transaction can proceed.
Indicates the business standing of the Applicant as FNB is willing to underwrite their obligations.
It removes the admin burden of getting the beneficiary to return security that has been provided.
As a minimum, the following parties are involved
The party who relies on the guarantee as security against the risk of non-performance/default by the applicant
The party applying for the issuance of a guarantee to cover the risk of their non-performance/default
The party who issues a guarantee on behalf of the applicant