The project in five facts.
Challenge, approach and results.
A bank guarantee represents an independent and irrevocable obligation of the bank – the guarantor – to pay the beneficiary the amount stated in the guarantee in the event that the applicant for the guarantee fails to fulfil the obligations arising from the underlying contract concluded with the beneficiary. A guarantee is always expressed in monetary form and its obligation is treated separately from the obligation of the principal debtor. Bank guarantees developed due to the demands of rapidly expanding international trade in the 1960s. In the practical part, the procedure for obtaining a bank guarantee at bank X for legal entities is outlined, demonstrating that in order to obtain a guarantee, it is necessary to submit diverse documentation on the part of the company – the applicant for the guarantee. On the basis of the collected documentation, the bank verifies the creditworthiness of the company and the seriousness of the transaction for which the guarantee is required.
Problem
A bank guarantee represents an independent and irrevocable obligation of the bank – the guarantor – to pay the beneficiary the amount stated in the guarantee in the event that the applicant for the guarantee fails to fulfil the obligations arising from the underlying contract concluded with the beneficiary. A guarantee is always expressed in monetary form and its obligation is treated separately from the obligation of the principal debtor.
Solution and Method
Bank guarantees developed due to the demands of rapidly expanding international trade in the 1960s. Today they are used in both international and domestic business environments. The main advantage that a bank guarantee offers to the beneficiary is that it avoids the risk of illiquidity and insolvency of its contractual partner, as well as simple and quick encashment if the contractual partner fails to fulfil the agreed obligations.
However, it is a relatively expensive instrument of security, as the costs of issuing and maintaining bank guarantees can be very high, and therefore they are not always the most appropriate method of securing against risks. It is therefore sensible for a company to examine other, more favourable forms of securing against risks. The diploma thesis presents in detail the types of bank guarantees and their characteristics.
Likewise, the legal relationships that arise when conducting business with bank guarantees are explained.
Results
In the practical part, the procedure for obtaining a bank guarantee at bank X for legal entities is outlined, demonstrating that in order to obtain a guarantee, it is necessary to submit diverse documentation on the part of the company – the applicant for the guarantee. On the basis of the collected documentation, the bank verifies the creditworthiness of the company and the seriousness of the transaction for which the guarantee is required. The procedure for deciding on the issuance of a guarantee by the bank and the course of its issuance is also shown.
Likewise, the procedure and conditions for encashing the guarantee and the concept of validity of a bank guarantee are explained.
Module, programme and stories.
Your diploma project for a real company.
A diploma thesis at Academia solves a challenge from a company – often the one where you do your 800 hours of placement. Read about the Računovodstvo module or book a consultation.