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PALBON-SuitesComplete ERP Solution

Guarantees and standby credits

Performance guarantees, advance-payment guarantees and standby credits of a trade are kept as PALBONSphere Bank Guarantee records linked to the trade. From the guarantee, PALBONTradeFinance writes the SWIFT MT760 that issues it and an MT767 for each amendment.

To open the list: Trade Finance › Banking › Bank Guarantee (opens in Desk).

1. Create the guarantee

  1. New Bank Guarantee.
  2. Bank Guarantee Type: Providing (your bank issues it in favour of a counterparty, for example a performance guarantee to the buyer) or Receiving (a counterparty's bank issues it in your favour).
  3. Reference Document Type: Trade; Reference Document Name: the trade. This link is what makes it part of the trade.
  4. The Customer or Supplier, the Amount, Start Date and End Date, Name of Beneficiary, the Bank and its details, the Bank Guarantee Number when known.
  5. More Information: the guarantee's terms in words, for example Performance guarantee: 2% of the sale value, payable on the buyer's first written demand stating our failure to deliver within the laycan. Subject to URDG 758.
  6. Save and Submit as your accounts process requires.

2. Write the MT760

On the saved guarantee (linked to its trade), click SWIFT › Write the MT760. The app writes an outgoing SWIFT Message draft: reference, issue date, ISSUE, the URDG rules, and the undertaking (amount and currency, beneficiary, applicant, validity and the terms). It opens the message so you can review it, then Submit for Release; a Trade Finance Manager Releases it (see SWIFT messages).

A guarantee not linked to a trade says Link the guarantee to its trade first (Reference: Trade).

3. Amend it: MT767

Click SWIFT › Write an MT767 amendment and give any of:

  • New amount,
  • New expiry,
  • Other change, in words (for example Validity extended for the later laycan agreed in ADD I).

The app numbers the amendments in order and writes the MT767 draft (ISSUE OF AMENDMENT, the sequence number, the date and the changes). At least one change is needed (Say what the amendment changes: the amount, the validity or the wording). Update the guarantee record itself with the new amount or end date once the bank confirms.

4. Standby letters of credit

A standby credit can also be kept as a Letter of Credit with LC Type Standby and Applicable Rules (40E) ISP98 (or UCP 600), with the same deadlines, facility reservation and amendment history as any credit. See Letters of credit.