Collateral Transfer, or leasing a Bank Guarantee, cannot take place without the bank to bank platform referred to as the SWIFT System, (“Society for Worldwide Interbank Financial Telecommunications”). This platform allows for the transfer of Bank Guarantees, as per a Collateral Transfer Agreement, as outlined below.

A Collateral Transfer Agreement is an agreement between two companies, one designated as the Provider, (owner of the Bank Guarantee), and another company designated as the Beneficiary, (the Beneficiary of the Bank Guarantee), where the Provider will instruct their bank, (the Issuing Bank) to SWIFT transfer a Bank Guarantee to the Beneficiary’s bank, (the Receiving Bank).

The SWIFT system is a membership only international financial messaging platform, allowing member banks and financial institutions to send and receive authenticated financial messages to each other. It is therefore important that both the Provider and the Beneficiary must make sure that their banks are members of the Society for Worldwide Interbank Financial Telecommunications, before entering into a Collateral Transfer Agreement.

The Issuing Bank will often pre advise by SWIFT to the Receiving Bank that they will be receiving a Bank Guarantee in favour of their client, the Beneficiary. The Receiving Bank will acknowledge receipt and confirm by Swift that they will accept the instrument, at which time the Issuing Bank will formally SWIFT transfer the Bank Guarantee as per the instructions contained within the Collateral Transfer Agreement.