The Issuing Bank and the Receiving Bank are the two banks that are involved in the execution of a Collateral Transfer Agreement, and they utilise the bank to bank platform, SWIFT, (“Society for Worldwide Interbank Financial Telecommunications”), to transfer Bank Guarantees.

The SWIFT system is a secure international messaging system, and allows banks and financial institutions to send authenticated messages to each other, which includes the transfer of Bank Guarantees and other bank instruments. SWIFT enjoys a global membership, and all potential members go through a strict due diligence procedure before being allowed to join.

Basically, a Collateral Transfer Agreement is where one company and the owner of the asset, referred to as the Provider, agrees to transfer a Bank Guarantee to another company, referred to as the Beneficiary. Both the Provider and the Beneficiary must ensure their banks, (the Issuing Bank and the Receiving Bank respectively), are members of SWIFT otherwise the Collateral Transfer Agreement cannot be executed.

For more further details on the Provider, please go to “Who Are Providers And What Are Their Benefits From Leasing Bank Guarantees”.

The roles of the Issuing Bank and the Receiving Bank within the confines of the Collateral Transfer Agreement are twofold. First, they must both carry out extensive due diligence on the contract, ensuring that all international and local Financial Laws are being adhered to, and secondly to execute the contract utilising the bank to bank platform, SWIFT.

Under the Terms and Conditions of the Collateral Transfer Agreement, the Issuing Bank under instructions from the Provider, will SWIFT transfer a Bank Guarantee to the Receiving Bank for account of their client, the Beneficiary. It is usual for the Issuing Bank to pre advise by SWIFT, the arrival of the Bank Guarantee to the Receiving Bank.