To understand Collateral Transfer, which by the way, is the correct and technical term for Leased Bank Guarantee, you must first understand about Providers and Provider Groups. Provider Groups can be found in most global financial centres, and with their access to a massive portfolio of assets are recognised as Sovereign Wealth Funds, Hedge Funds, Private Equity Funds and Larger Family Offices.
Providers and Provider Groups utilise part of their asset base, to provide Bank Guarantees, to the Collateral Transfer market, where many companies can be found seeking to lease Bank Guarantees. In order to lease a Bank Guarantee, these companies must enter into a contract with the Provider, referred to as a Collateral Transfer Agreement.
Under the Terms and Conditions of a Collateral Transfer Agreement, the Provider will transfer a Bank Guarantee to another company, (the Beneficiary), for an agreed period of time, usually one year. To pay for this arrangement, the Provider will receive a payment from the Beneficiary, known as the Collateral Transfer Fee.
It is common practise for Provider Groups to collateralise those assets that are underperforming within their portfolio, and use them to supply Bank Guarantees for Collateral Transfer. Therefore, the return received from Collateral Transfer, together with that received from the underperforming assets, the Provider is now enjoying an overall increased rate of return.
The Collateral Transfer market is growing year on year, and the main driving force with their unique financial models, such as the Collateral Transfer Facility, and their unrestricted access to Providers and Provider Groups, is IntaCapital Swiss. They continue to supply access to loans and lines of credit, commonly alluded to as Credit Guarantee Facilities, to those companies in need of such facilities, but who are living in a rapidly diminishing credit market.