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GLOSSARYTERMS AS A CREDIT DESK USES THEM

Counter-guarantee

What is a counter-guarantee, and why do cross-border guarantees use one?

ONE OF 366 TERMS · FREE · NO SIGNUP

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED

// THE SHORT ANSWER

A counter-guarantee is a guarantee one bank gives another so that the second bank will issue its own guarantee to a beneficiary, usually in the beneficiary's country. A foreign buyer or government often accepts only a local bank's guarantee under local law, so the exporter's bank counter-guarantees a correspondent there, which issues the local guarantee and claims on the counter-guarantee if it is called. The exporter's bank pays on a complying demand and recovers from its own customer, so it approves the line as it would a direct guarantee, with the correspondent and local law added to the risks. The ICC's URDG 758 rules cover both where adopted.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.

// WHAT IT IS NOT

A cross-guarantee is given by companies in a group for each other's debts to a lender; a counter-guarantee is one bank's undertaking to another that stands behind a guarantee issued to a third party.

// WORKED IN

// NEXT TO IT

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