Reply To: Are Bank Guarantees worth the paper they’re written on?



“Your example is not a good one. Insurance companies have to pay out of their own pockets. “
I think it is a good example.
The BG is a form of performance bond, which is the same as any major contract in UK, that the contractor would have with the client. It is the norm for the contractor to put down a percentage of the value, in the form of a bond, or alternatively, if the bank agrees, they can take insurance, with the policy then offered to the bank.
Either way, it is a form of insurance, where the developer/contractor pays a premium for the amount covered. Therefore, it is not the developer/contractors money at risk (other than the premium), but the financial institution, be it a bank or insurance company.

“it’s the developers’ money, not the banks” So if this is correct and what you believe, say a developer has a site for 100 units at a development cost of 200.000 each. Do you believe that the developer has deposited with the bank the 20million?

“It’s supposed to be a ‘Guarantee’ – not “You can have your money back but you’ll have to fight for it in court”
As is a motor policy, a guarantee of your loss, unless it can be proved otherwise.