What Is A Collateral Transfer Agreement

Collateral transfer is the provision of assets from one party (the supplier) to the other (the beneficiary), often in the form of a bank guarantee. This occurs when the supplier (through its issuing bank) imposes a debt guarantee (bank guarantee) on the recipient against a “rent” or “return” known as “contractual fees.” The parties agree to enter into a collateral transfer agreement (CTA) that governs the issuance of the guarantee. Leasing a bank guarantee is a common term related to collateral transfer. Since it is not possible to physically “rent” a bank guarantee, we use the term “lose” because its structure is similar to that of a commercial lease. However, these agreements should be properly referred to as collateral transfer facilities, since there is virtually no leasing. A bank guarantee is specifically for the beneficiary and each contract is tailor-made. A bank guarantee cannot be sold, purchased or sold. A collateral transfer mechanism is the supplier that uses its own assets to increase a specific bank guarantee through its issuing bank for the exclusive use of the declared beneficiary for the specified duration. It is actually a form of securities lending and often a derivative of the re-mortgage. There is no reference to “leasing” if you get a bank guarantee in this way. The guarantee is provided by the provider`s issue bank on the recipient`s account with the recipient bank and transmitted to the interbank via the corresponding SWIFT platform (MT760 for guarantees). During the term of the guarantee, the beneficiary may use it for his own needs, which may include guarantees for loans, lines of credit or for trading purposes.

At the end of the validity period, the beneficiary agrees to remove any charge from the guarantee and return it (or return it) before expiry and to compensate the supplier for any losses resulting from the credit delay it guarantees. If a collateral transfer agreement is for two years or more, the contract is automatically renewed, but the renewal is only obtained with the input of all the conditions set out in the agreement. The wording of the debt bank guarantee in accordance with THE ICC`s uniform demand guarantee rules (URDG 760) is not affected by the Collateral Transfer Agreement, so the recipient is free to use the guarantees for his or her own purposes.