bank guaranty definition

bank guaranty

Letter of indemnity issued by a bank to a third party, on behalf of a customer and against the customer's counter-guaranty as a security. A bank, for example, may issue a guaranty to a shipping company protecting it from any harm or loss arising out of the release of a shipment where its consignee (bank's customer) has lost or misplaced original shipping documents. In construction industry, a bank guaranty (as a bid bond or performance bond) is an essential requirement for the award of a contract.

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