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Hi all,

Hope someone can help me with this.

When Guarantor Bank charges Counter Guarantor for the issuance of a Guarantee, what is the usual payment method if the term is for example 3 years..

Quarterly payments
Annual payments
Full amount upon issuance i.e. % p.a. x 3 years

Thanks
Kiara

@Kiara,

There is no fixed method of claiming fee between re-issuing bank and counter-guarantee bank. It all depends on decision made by both banks.

Those three methods you mentioned are all possible.
Quarterly basis in advance or in arrears.
Annually basis in advance or in arrears.
Upfront from issuance till expiry ( normally till expiry of local guarantee, not expiry of counter-guarantee).
There is another possibility which is semi-annually in advance or in arrears.
Also, you have to make sure if it is calculating in actual number of days or in monthly basis/quarterly basis.

The decision is often made by Sales guys, so you might need to check with your Sales team how they communicated with your counter-party bank if you are working in Operation. You should have internal fee policy in case your counter-party is other branch.

Usually, there is minimum charge such as EURxxxx P.A. or P.Q., so you might also need to check if minimum charge is existed or not.

In general, JPY currency and GBP currency guarantee are calculating guarantee fee in 365 days basis and other currencies are in 360 days basis.

Another point you might need to make sure is that if the fee calculation is last day inclusive or last day exclusive in case the fee is calculating in actual number of days.
Generally speaking, last day inclusive is the most common one.

Regards,