There is no central register of guarantees that records all the guarantees banks have granted. Each bank is required to set up its own Special Register of Guarantees to record the guarantees that it issues.
This obligation derives from Banco de España’s Circular No. 4/2017 (in Spanish)
If you are not sure, you can request a detailed credit report from the Banco de España’s Central Credit Register – CIRBE by its Spanish abbreviation – which will also show indirect exposures, as well as the bank with which they have been arranged.
Before it gives you a guarantee, your bank must inform you about the various ways in which the guarantee may be terminated. Among other things, the information it gives you must expressly state whether you need to return the original document in order for the bank guarantee to be cancelled.
If it was agreed that the return of the original document is a requirement for discharge of the guarantee, the bank may require you to return it before it stops charging the periodic fee for providing the guarantee.
It is considered good banking practice for banks to waive the requirement to return the original document when other evidence is given to show that the liability has been met.
The Banco de España’s Market Conduct and Claims Department considers that customers should be exempt from account maintenance and/or transaction fees in the case of accounts held at the bank’s behest solely for payment services deriving from banking transactions. This is because in such cases the customer would be paying to meet an obligation (opening an account to facilitate the bank’s administration), imposed by the bank in its own interest, which is considered contrary to the principles of reciprocity and good banking practices.
A guarantee facility is a contract, usually between a bank and a company or self-employed person, whereby the bank undertakes to grant independent guarantees with specific characteristics, up to a certain amount, as requested by the obligor to meet business needs.
A demand guarantee is an independent joint and several guarantee in which the beneficiary can directly demand that the guarantor meet the underlying obligation in the first instance, without having first sought fulfilment from the obligor. When you are asked to provide a guarantee it will usually be of this type as it ensure maximum protection for the beneficiary.
Banks are free to ask from their customers any type of guarantee prior to granting the requested financing, depending on their commercial and risk policies.
If your bank asks you for a guarantee, it must:
- Provide pre-contractual information
- Explain the risks incurred adequately
- Inform you about the debt exactly as it would inform the obligor if it requires you (rather than the obligor) to settle it as guarantor.
The risks assumed will depend on the type of guarantee and the chances of the guaranteed party (obligor) not meeting their payment obligations. You need to be aware of the guarantee’s duration, as it will not usually be cancelled or discharged until the underlying obligation has ended.
As a rule, guarantees are given jointly and severally, such that the beneficiary of the guarantee is entitled to require either the obligor or the guarantor to meet the obligation. However, if the guarantor ends up complying with the guaranteed party’s obligations, he or she will be entitled to require reimbursement from the obligor of the amount paid together with interest and expenses.