Bank guarantees getting outdated?

bank guarantees


The international trade has remained dependent on the banks for a period too long. This period of time has given them enough time to ponder upon the fact that they have been doing business with the same client for a long time now. This realisation poses a question for them as to why they must pay the bank for getting a bank guarantee letter. Well the question was much justified as the relation between a buyer and seller is intact more direct and prolonged with times.

This pondering led to the rise of open account trading. This was earlier seen as a threatening move to banks who offer their service in trading for corporations. But it is still a far fetched possibility to completely rule out the involvement of banks in international trade merely because the complexities of international regulations constantly changing with time and change of government policies on international trade. It is not possible for corporations to handle all of it alone and pursue their trade too. They are always going to need a bank to mediate the trade and form a trust factor with the virtue of a bank guarantee. What is required of the banks on the other hands is that it becomes a good partner and resolves to reduce the time lapse in providing its trade services because time is money honey.

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