How the leased Bank Instrument and Monetization Works?

A financial instrument can be technically leased from an account holder, an asset owner, and asset management companies (like us) in reality.

According to what came to our attention, brokers from all over the world have emailed us per week, asking how to monetize a bank instrument (SBLCBGMTNBank Draft) that it has leased?

From what they assume, something cannot be monetized if it is leased, as it is not belonging to the lessor anymore. VERY SIMPLE they say!

Despite that, in the case of treating the bank instrument as a simple asset, they are 100% RIGHT; however, in the case of MONETIZATION, they are 100% WRONG. The usage of a financial instrument indicates credit enhancement. The monetizer with the bank receiving requires a credit facility. When any company or individual leases different types of bank assets, for example, a car, they gain the rights of usage of the asset for a time that is predetermined. Therefore, the lessor can monetize a Lease Bank Instrument.

Does the Bank Instruments worth something?

The answer is YES it does.

  1. Bank Instruments (asset) are of value.
  2. It can come under the usage of any individual and/or company able to monetize it with a credit facility, in turn generating profit – enough to pay for the provider fees, any loan granted to the beneficiary, and monetization cost.

How is the Attorney’s Trustees Office able for the provision of a Non-Recourse or Recourse Loan with a Leased Bank Instrument?

It can be assured by us that it is not for charity!

Our attorney’s trustees have a financial strategy that is well thought via different trading programs which is the reason they will accept any type of owned or leased bank instrument and grant a provision of a Non-Recourse or Recourse loan that will, in turn, pay for the monetization, the loan granted to the provider, and during this process, they will also make a LOT of money!

Finance A Business Using A Bank Instrument

Bank Guarantees and Standby Letters of Credit could be used to fund a business; especially those seeking to expand or grow. Getting a monetized BG / SBLC is the easiest and fastest way to get some much-needed funds for a company. Bank securities can be monetized and then used to create markets for trading. One of the better alternative ways to fund a company may be BG’s / SBLC’s. A possible explanation is, you’re not reliant on a lender person. The investments are likely to come in tranches and this might be a great way to handle your money.

What Parts Do Banks Play in BG / SBLC Transactions?

The Bank not the Initiator but is the Deliverer of the Transaction

Practically speaking, “Banks DON’T issue Bank Guarantees and Standby Letters of Credit” Instead, the bank work as the deliverer courier not the initiator of the transaction, they CONFIRM that their customer has enough funds on their account. Let’s say you are using a courier to send a package to a client, for example; You are the package supplier and the carrier is the distribution person who supplies the recipient with your package. The carrier is not the parcel supplier, they are merely the delivery agent that the provider uses to transfer the package to the receiver’s location from the provider’s house.

Technically speaking, “Banks DON’T issue Bank Guarantees or Standby Letters of Credit” Instead, the bank is the deliverer not the initiator of the transaction, they CONFIRM their client has sufficient funds. The Bank is just the delivery courier who works for the BG and SBLC Provider who is the actual asset owner, asset holder, and asset manager. For example; let’s pretend you use a courier to deliver a parcel to a customer. You are the Provider of the parcel and the courier is the delivery agent who delivers your parcel to the Receiver. The courier isn’t the Provider of the parcel, they are just the delivery agent whom the Provider uses to send the parcel from the Providers location to the Receivers location.

Using the illustration above, banks treat Bank Guarantees and Standby Letters of Credit in exactly the same way. The bank serves as the courier and receives a financial order from a supplier to send to the receiver’s bank one of the providers’ assets (BG or  SBLC). In other terms, the banks are instead of the courier, becoming the most widely known as MT messages as the Sender and Recipient of SWIFT messages. (If it’s MT760, MT799 and so on).

Apart from receiving fees for “cutting” (initiating) and “delivering” the bank instrument, the bank holds no interest in the transaction. As the financial instrument was initiated and secured since then against the cash position in the bank account of the Provider at the issuing bank, hence all other responsibility for the asset is theirs.

Reasons Why Banks Don’t Issue Bank Instruments BGs & SBLCs 

If a bank wants to raise Capital, it DOESN’T uses BGs or SBLC because the bank either issues:

A/ Bank Bonds

B/ MTNs (Mid Term Notes)

C/ Bank Stock or Shares

  • The Bank NEVER uses its own cash to secure or encumber a Bank Instrument BG or SBLC. In the Bank, BG or SBLC are secured against client cash accounts of the Provider.
  • BGs and SBLCs are niche market client products instead of bank products that are created at high net worth bank clients’ requests with large cash holdings at the bank.
  • Tell the Bank Officer at your local World Top 25 Bank Branch that you want to buy a Leased Bank Guarantee. As BGs and SBLC is NOT a publicly offered Bank product, so most will not know what you are talking about. They are only privately available to high net worth bank clients with have enough funds to cut the instrument against the funds in their own bank account.

You need to have a special bank account called a custodial account to issue a BG or SBLC. A custodial account is a special bank account that can issue, receive, and hold financial instruments. To establish a custodial account at a bank, it takes 3 months+ and costs approximately €250,000 to €350,000 Euro during setup. Such accounts are generally made available to the Top 1% of Private Banking clients only. You cannot just walk into a bank and ask to set up a custodial account!

Genuine Bank Instruments Providers

It can be hard to get genuine BG / SBLC providers through. The banks do not market BG’s / SBLC’s as their own banking goods, only because they are not authorized to. Bank Guarantees and Standby Letters of Credit are issued in an account at the bank by high net worth clients with substantial capital reserves. Clients of high net worth are typically private equity, hedge funds, pension funds, major companies, etc. Not only is it very challenging to get in contact with providers of bank instruments, but they are also very stringent, but they also don’t tangle around.

Authentic Providers like ourselves carry out several safeguards which means that any approved mandate representatives linked to Providers are too strictly followed. This is great news for us because we know that we are carrying clean business, but it means that any company we set up must be able to follow those protocols. Because of the strict rule, Prestige will also let you know what’s necessary but generally, we’ll ask for POF and BCL to tell you can pay 10 percent of the bank instrument’s face value. We would like to know that any company that crosses us can pay the lease fee.

Why Bank Instruments Providers are so Hard to Find?

  1. Issuing BGs & SBLC requires a very specialist financial skillset and therefore, there are very few genuine BG or SBLC Providers, and most High Net worth Investors do not have the expertise and time to involve themselves with the issuing process of the bank instrument.
  2. It is a reality that you need the bank instruments Provider much MORE than they need YOU! Genuine Providers are VERY selective with who they choose to do business with as they have more clients than they need!
  3. High Net Worth corporations are normally the bank instruments Providers who have other ways of investments available.
  4. As the Monetizer fails to perform as per transaction procedures then 80% of BGs and SBLCs Provider deliveries to third Party’s Monetizers FAIL.
  5. The Bank Instrument world has many silly investors having no idea about how a band instrument works and what is it for and mistakenly believe that the BGs and SBLCs fall from heaven for FREE with no Upfront Fees and the world owes them a living.

Swift Fees

When a client sends an application for a Bank Guarantee or Standby Letter of Credit most do not understand how the procedures behind the transaction work. There are certain buyers who think that there are no fees involved when issuing a bank instrument and presume the SWIFT messaging service is FREE. This is completely FALSE. The banks of both parties communicate using SWIFT messages. Sending a SWIFT message isn’t cheap, these are bank charges that normally cost at least 2% of the face value of a BG or SBLC.

How Do BGs and SBLC’s leasing Work?

When a corporation finishes the leasing application form for a BG / SBLC, what they effectively do is lend collateral what is technically called a temporary “CTA” (Collateral Swap Agreement). Let’s assume you ‘re a petroleum refining business trying to purchase oil and working with claim ABCD Oil. You have a deal with ABCD Oil that says you want to buy €100 million worth of oil (you have $1B EURO on your books). You can opt to never use your own bank account and request via your own bank, but rather to rent a Standby Letter of Credit from another provider.

There are many ways to use BG’s / SBLC’s, and it’s all in the MT760 language. We may issue a BG or SBLC for:

  • Trade and exchange (to buy goods).
  • They could also be used to back up credit lines provided by banks and/or projects finance.

Also, we can issue monetizable cash-backed BG’s / SBLC’s. Even so, to grant the BG / SBLC in favor of the Monetizer, we’ll have to know who the monetizer is in order to assign the BGs or SBLC in favor of the Monetizer.

Lease An SBLC

You can implement one of two ways to lease a BG / SBLC. One way is to register with your bank for a Standby Letter of Credit or; use bank instrument provider like ourselves to fill out a DOA (deed of Agreement). Terms and timelines are NOT negotiable. We emphasize that prior to signing, buyers will fully understand the papers. Double-check your information, be consistent and accurate because it can be an incredibly costly error.

Become An
AG Finance TradeXpert
Broker Today!