ICC is an anacronym for the International Chamber of Commerce. The ICC is represented in over 100 countries and enjoys a membership of 45 million members. It was founded in 1919 and today their headquarters can be found in Paris, France.
The ICC is a pro-business organisation and sets the standards and rules for all form of business including banks and finance. These rules are strictly adhered to by all members. We are especially interested in the rule URDG 758.
URDG 758 is obviously highly pertinent in regard to bank guarantees and to a lesser extent standby letters of credit. It is basically a set of international guidelines set up by the ICC in 1991. They were issued specifically issued in regard to monetisation of demand bank guarantees.
URDG 758 calls for precise, concise and specific wording within the format of a demand bank guarantee. Once a lender sights this wording they will understand that they are totally secure when lending against a demand guarantee. The verbiage is written in such a way that it will deter any potential litigation.
URDG 758 guarantees that any lender is totally secured. Thus, in the event of a borrower defaulting on a loan or line of credit, the demand bank guarantee will pay any claim. It is payable on first demand.
SWIFT or as its full name is known, the Society for Worldwide Interbank Financial Telecommunications. SWIFT is a global dedicated international financial messaging platform and is used by most banks located around the world.
It is a membership only company. SWIFT enjoys a membership of around 11,000 in over 200 countries. Due diligence is particularly severe on potential members unless they are blue chip or invest grade institutions.
Banks and financial institutions are especially happy to use the SWIFT system. This is due to the number of safeguards installed by SWIFT. These safeguards are validation and verification checks on all out going and in coming financial messages. All messages are authenticated. All banks have specially trained operators on their incoming and outgoing swift message terminals.
All SWIFT messages are dedicated to a particular transaction. Each SWIFT message has its own dedicated reference number. They are represented by the same two letters MT, (Message Type), followed by three numbers. For example, a MT199 is a free format message. It is a bank to bank message that advises the value of a bond.
When transmitting bank guarantees, standby letters of credit and documentary letters of credit swift employs two message types. The MT799 and the MT760.
The MT799 is a pre-advice. One bank will advise another bank that they will be receiving a bank guarantee, a standby letter of credit or a documentary letter of credit. Included in the pre-advice will be the name of the beneficiary of the instrument.
The MT760 is used for the actual delivery of a bank guarantee, a standby letter of credit or a documentary letter of credit.