The importance of bank guarantees in modern business (business environment in Serbia)

Mirjana Knezevic,Aleksandar Lukic

doi:10.21511/imfi.13(3-1).2016.07

Abstract

In contemporary international payment transactions, there takes place frequent use of bank guarantees as collateral payment in commercial transactions. The bank guarantee is usually required when it comes to specific business agreements that require stronger commitment and assurance that all contractual obligations will be implemented exactly as indicated. Knowledge of the use of bank guarantees allows better negotiating position in making business, quicker response to the demands of public calls for tenders and the provision of their own claims. Because of its rapid and efficient implementation, the bank guarantee is one of the most commonly used collateral in international business. Keywords: bank guarantee, business environment in Serbia, legal framework of bank guarantees. JEL Classification: G21, M16, M21

Highlights

Through the presentation of the business environment in Serbia, we aim to provide a credible picture of how the use of bank guarantees represents an important instrument to ensure the enforcement of contractual obligations and payments
The issue of bank guarantees will be discussed in an interdisciplinary manner, in order to comprehensively clarify a number of issues and propose appropriate solutions associated with these important instruments of security of payment in international trade
Bearing in mind the fact that the entities participating in the implementation of commodity and non-commodity turnover are faced with elements of insecurity and uncertainty, stemming from their financial position, but more often from the fact the various institutional factors, the paper emphasized the importance of using bank guarantees as security instruments in modern turnover

Summary

Literature review

In the modern business environment, characterized by the spatial distance and the inability of the parties to perform a realistic assessment of the creditworthiness of a business partner, when it comes to commercial transactions, there is often a need for the use of instruments that secure payments. Knezevic (2015) deals with the legal regulation of the institute of bank guarantees in Serbia and, in his work, he gives an overview of the current situation and suggestions for some new legal solutions that should be made in order for the legal nature of the bank guarantee to be more fully defined In addition to these sources of literature and in order to provide a more effective analysis of the research subject, the paper used the financial statements of banks in Serbia and the laws regulating this area

Methodology

Findings

Conclusion