Swift, (“Society for Worldwide Interbank Financial Telecommunications”), is a bank to bank platform, that allows banks to send Bank Guarantees, to each other, when executing a Collateral Transfer Agreement. SWIFT is defined as a global bank to bank membership platform, that is an international financial messaging system, that allows bank and financial institutions to send authenticated financial messages to each other.
Simply put, a Collateral Transfer Agreement is signed by two companies, the owner of the Bank Guarantee referred to as the Provider, and the Beneficiary of the Bank Guarantee, referred to as the Beneficiary. The Provider will instruct their bank, (the Issuing Bank), to transfer via the Swift system, a Bank Guarantee, to the Beneficiary’s bank, (the Receiving Bank).
For more information on the Provider please see “Who Are Providers And What Are Their Benefits From Leasing Bank Guarantees”.
The Issuing Bank and the Receiving Bank must due diligence the Collateral Transfer Agreement to ensure all international and local Financial Laws are being followed, and following successful due diligence, the Issuing Bank can then utilise the Swift system to transfer a Bank Guarantee to the Receiving Bank, as per the instructions contained in the Collateral Transfer Agreement. Both the Provider and the Beneficiary must ensure that their banks are members of the Society for Worldwide Interbank Financial Telecommunications if they wish to enter into a Collateral Transfer Agreement.
Prior to transferring the Bank Guarantee, it is normal for the Issuing Bank to pre advise by swift the arrival of the Bank Guarantee to the Receiving Bank before swift transferring the Bank Guarantee. The Swift platform is essential for daily bank to bank business, and essential for Bank Guarantees, and Collateral Transfer Agreements.