Guarantees and letters of credit

Guarantees

Karlovačka banka issues guarantees by order of its clients in favour of beneficiaries at home and abroad and receives guarantees issued by foreign or local guarantors in favour of its clients.

Karlovačka banka offers the following types of guarantees:

  • Bid bond-when an investor announces a public tender for contractors of certain investment work, each bidder is required to have Karlovačka banka guarantee to the investor that the participant will not withdraw from the contest or withdraw from the contract if their offer is accepted
  • Performance bond– if you assume an obligation (an obligation of production and delivery of goods or an obligation of performance), Karlovačka banka guarantees to your buyer that you will execute your assumed obligations in the manner and within the time limit as stipulated by the contract
  • Warranty bond-in this case Karlovačka banka guarantees that your firm, as a contractor, will duly fulfil the obligations of the repair to investor during warranty period (deadline for the building completion or commissioning the plant) or that you will indemnify the investor for the damage that occurred because of possible defects in the warrantee period
  • Advance payment bond-in case when advance payment and guarantee should be provided (for an agreed delivery of the goods or for the performance of the work), Karlovačka banka guarantees that the advance will be refunded if the work fails to be performed in the manner provided for by the contract
  • Payment guarantee– is issued in various forms of lending (commercial or financial) whereby Karlovačka banka undertakes to settle the debt if the debtor/the Bank’s client fails to perform within the agreed period
  • Custom guarantee– guarantee in favour of the custom administration with which the Bank guarantees that customs duties will be duly settled in cases when goods are taken but the customs duty has not been paid. It can also be used to guarantee for orderly payment of custom duties on temporary import of goods and for ensuring debt that may arise in the transit.
  •  Letter of intent– for entering a public competition for the performance of specific works, investors request offer and letter of intent. By issuing a letter of intent Karlovačka banka is obliged to issue a a performance bond to the client, if their offer is accepted and the contract concluded. A letter of intent can precede issuing of other types of guarantees.

For the issuance of guarantees, the client pays the fee in accordance with the Decision on fees for performing banking services.

Letters of credit

Karlovačka banka offers its clients the possibility of opening documentary letters of credit.

Documentary letter of credit is a payment instrument in international trade, in which the Bank, in accordance with the client’s request and instructions (importer or exporter) assumes the obligation of payment or requests a payment through a bank which is a participant in the letter of credit.

If you are the buyer/importer, the Bank opens an import letter of credit at your order and forwards it abroad.

Payment by letter of credit gives you security because Karlovačkabanka will effect the payment only upon receipt of the valid letter of credit documents that indicate that the delivery of goods has been made according to required quantity and quality.

If you are the seller/exporter, letter of credit gives you security in the collection of delivered goods or supplied services under the condition that you have presented to Karlovačka banka all documents in accordance with conditions of the letter of credit.

The documents related to a documentary letter of credit are; commercial invoice, transport documents, documents of insurance and other documents (certificate of origin of the goods, certificate on the quality of the goods, etc.).

Depending on the payment method a letter of credit can be the one with deferred payment, which means that the payment is postponed according to predefined and pre-agreed settlement period and upon presentation of proper documents and fulfillment of other conditions of the letter of credit.

For the issuance of a letter of credit with deferred payment, the client pays a fee in accordance with the Decision on fees for performing banking services.

The Bank credits the client’s account after receiving cover from abroad.

For payment of such discount bill it is necessary to submit the accompanying memo with the following data:

  • bill information (file number, date of issue, the amount)
  • user information (name, number of the account with the commercial bank, the basis of collection)

A bill should previously be endorsed.

The Bank will charge fees for all documentary operations in accordance with the Decision on fees for performing banking services.