Counter-Guarantee for Banks
Enhanced security for financing institutions (beneficiaries)
Counter-Guarantee - More flexibility and room for maneuver
As one of six measures within the package of measures, the maximum guarantee volume per exporter will be increased by the Federal Government. This gives German exporters more flexibility and room for maneuver in their foreign business. The expansion creates financial leeway for new business and has a positive impact on Germany as an industrial location and the German labor market. For example, companies in large-scale transformer plant construction will benefit from new market and growth opportunities in the energy sector and in climate protection. The Counter-Guarantee is a decisive step towards securing and expanding the competitiveness of German companies.
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Advantages for new opportunities with the Counter-Guarantee
Our comprehensive package of measures significantly improves the possibilities for using the Counter-Guarantee. With a general increase in the maximum amount from EUR 80 million to EUR 120 million per exporter, we offer you extended opportunities to secure and promote your export transactions:
- Increased maximum amount: The maximum guarantee volume is raised to EUR 120 million per exporter.
- Flexibility for eligible transactions: A higher maximum amount can be set on a case-by-case basis for particularly eligible transactions, e.g. in the area of energy transition.
- Support for transformation and resilience: Promotion of transactions that contribute to climate transformation and the strengthening of technological sovereignty.
Why the Counter-Guarantee has been optimized
Exporters are reporting an increased need for guarantees due to general and inflation-related increases in order values. We have adapted the Counter-Guarantee to meet these requirements:
- Adjustment to market conditions: Increase in the maximum amount due to increased order values in recent years.
- Targeted support: Support for large-volume and eligible transactions to strengthen resilience and technological sovereignty.
- Temporary increases: Compensating for market weaknesses by temporarily increasing the maximum amount if there is a proven need.
Guarantee commitment in favour of the guarantor
The Counter-Guarantee provides security (it is a guarantee commitment) in favour of the guarantor. The guarantor can be a bank or surety company. The Counter-Guarantee relieves the guarantor in large part of the risk that he is unable to successfully take recourse for compensation to the exporter. If the bond is called, the Federal Government will reimburse the guarantor for the guaranteed share of the bond amount paid out (maximum 80 %). The reimbursement is made on first demand and, above all, irrespective of the reason for calling. A reimbursement is made also in case of a fair calling.
The Federal Government has a recourse claim on the exporter in the amount paid out to the guarantor. This is payable six months after the guarantor is reimbursed at the latest. If by that time it has been confirmed that the exporter has a valid indemnification claim under the corresponding Contract Bond Guarantee because the contract bond was called, this will be set off against the claim to recourse. Although a bond issued on request of the exporter is called, there would be no liquidity drain at the exporter in that case.
Worth knowing: The Counter-Guarantee complements a Contract Bond Guarantee and thus cannot be used independently.
Counter-Guarantee at a glance
Target group
- As applicant: German export firms
- As beneficiaries of the Counter-Guarantee:
- German banks / surety companies
- branch offices of foreign banks / surety companies with a seat in Germany
- foreign banks / surety companies (under certain conditions)
Special features
The Counter-Guarantee is a security in favor of the guarantor and must be applied for by the exporter.
For applicants for a Counter-Guarantee, it is a mandatory requirement that Contract Bond Cover is provided by the Federal Government for the transaction. In principle, Supplier Credit Cover is also required. However, this can be waived if the exporter has no foreign payment risks, in particular due to the terms of payment (e.g. confirmed letter of credit, progressive payment). In individual cases, the Counter-Guarantee can therefore also be provided by the Federal Government in isolation (Contract Bond Cover with Counter-Guarantee), i.e. without covering the other risks of the export transaction, if the provision of Supplier Credit Cover is not possible, not reasonable or not desired by the exporter.
The prerequisite for cover with a Counter-Guarantee is that the exporter is technically and commercially in a position to meet his obligations arising from the export transaction. In order to be able to check this, the exporter submits a self-assessment.
For guarantors, administrative processing takes place exclusively with the Federal Government when the Counter-Guarantee is issued and ends at the time of reimbursement payment. The guarantor is involved in this process before the final decision on the Premiumis made with the so-called "Supplementary declaration of the guarantor to the Counter-Guarantee". Furthermore, the guarantor must comply with certain notification obligations at all times.
Premium
- The Federal Government receives from the guarantor a part of the guarantee fee which the exporter has to pay to the guarantor for the issuance of the contract bond. For this purpose, the guarantor receives an invoice from the Federal Government for the initial and subsequent premiums; initially, an advance premium is charged, which is finally settled at the end of each calendar year or at the end of the guarantee period. No separate Counter-Guarantee fee is charged to the exporter.
- The exporter must pay the usual fees for the mandatory Contract Bond Cover and any necessary Supplier Credit Cover.
Counter-Guarantee: Your advantages at a glance
Digital
Exporters can apply for a Counter-Guarantee quite easily in our customer portal myAGA.
Supplentary cover
The Counter-Guarantee is a supplementary form of cover and can only be applied for in combination with a Contract Bond Guarantee.
No additional premium
No extra premium is payable for a Counter-Guarantee. The risk-priced compensation due to the Federal Government for assuming the Counter-Guarantee is discharged by means of its share in the bond premium which the exporter has to pay to his guarantor in any case for issuing the contract bond.
How does a Counter-Guarantee work?
The core of the Counter-Guarantee is the undertaking by the Federal Government (itself equivalent to a guarantee) towards the guarantor to reimburse to him the amount paid out on a bond call within 10 bank days and on first written demand. The percentage reimbursed can be up to 80%. The undertaking to pay is agreed in a guarantee contract made between the Federal Government and the exporter. If the contract bond for the benefit of the foreign buyer is not issued directly by the exporter’s principal bank, which provides the financing, but by a different credit institution, it is not the direct bond that will be covered by the Counter-Guarantee but the corresponding back-to-back guarantee issued by the exporter’s principal bank. In both cases the undertaking applies – unlike the insured events in Contract Bond Cover – for any and every reason for calling the bond, and therefore also to fair calling. After reimbursement has been made, the Federal Government has recourse on the exporter. The right of recourse is normally asserted only six months after reimbursement of the guarantor and only when no claim has been recognized in favour of the exporter as valid up to that date in respect of the corresponding Contract Bond Cover. If such a valid claim has been accepted, the claim for recourse will be set off against the amount due for indemnification.
Practical example of a Counter-Guarantee
Rehabilitation of the wastewater network in Ecuador
Since the beginning of 2017, Ludwig Pfeiffer Hoch- und Tiefbau GmbH & Co. KG has been modernising the wastewater network of the La Chala basin in Guayaquil, Ecuador. In the course of the project 450 kilometres of sewage pipes were cleaned. In addition, the German family-owned company is overhauling approx. 100 kilometres of the sewage network using various trenchless technologies together with 400 manholes.
The Federal Republic of Germany is backing the project with isolated Contract Bond Cover and a Counter-Guarantee.
Apply for a Counter-Guarantee
The exporter simply applies for this product online in the myAGA customer portal. They submit their digital application there to apply for cover for their export business with a Counter-Guarantee. To do this, they register once and effortlessly in just a few steps on our myAGA customer portal. The guarantor also submits certain declarations (e.g. supplementary declaration by the guarantor).
If you need help with the application process or have questions about the right product for you, please contact our company advisors.
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FAQs Counter-Guarantee
What is guaranteed with a Counter-Guarantee?
A Counter-Guarantee provides security for the exporter in favour of the guarantor for the loss up to 80% of the bond sum paid out by the latter. Payment guarantees assumed by the guarantor in excess of the actual bond amount, such as interest, compensation for damages, legal or other costs are in principle not insurable. An exception here is a Counter-Guarantee given in respect of an advance payment bond. This also covers the interest normally included in the bond.
What conditions does the exporter have to fulfil in order to get a Counter-Guarantee?
As a rule, the granting of a Contract Bond Guarantee is a precondition for getting a Counter-Guarantee. A principal guarantee can be dispensed with if cover of the other risks involved is not possible, not reasonable or not wanted by the exporter. A Counter-Guarantee can also be granted for covered business which is already being transacted if a principal guarantee and a Contract Bond Guarantee have already been granted, if only a principal guarantee exists but the granting of a Contract Bond Guarantee is still possible because the contract bond has not yet been issued or the main transaction has not been covered and cannot be covered for lack of risks that are eligible for cover (e.g. payment under an irrevocable letter of credit) but the granting of a Contract Bond Guarantee is still possible because the underlying contract bond has not yet been issued. In addition, it is necessary for the exporter to prove that he has the organisational and technological resources to ensure due performance of the export transaction. The assessment of the exporter’s ability to ensure performance is done mainly by means of a questionnaire to be filled out by him. The maximum liability of the Federal Government in respect of all Counter-Guarantees assumed is EUR 120 million per exporter. Subject to certain conditions this limit on the maximum exposure may be exceeded in individual cases if that turns out to be necessary due to the special nature of the transaction.
What period is the Counter-Guarantee valid for?
The commitment undertaken by the Federal Government begins in respect of guarantees already issued immediately with the receipt of the letter of confirmation from the Federal Government. In respect of a guarantee which has not been issued the commitment undertaken by the Federal Government begins when the guarantee is actually issued. If, in praxis, the coming into effect of the guarantee is taken as basis, the commitment undertaken by the Federal Government also begins with the coming into effect of the guarantee and not with its issuance.
When will the Counter-Guarantee become effective?
A Counter-Guarantee given by the Federal Government takes effect upon receipt of the letter of confirmation from the Federal Government. The Counter-Guarantee would become ineffective only if the guarantor failed to pay the premium within the term of payment set by the Federal Government even after receiving a letter of reminder; in such a case it is up to the guarantor to maintain the effectiveness by making payment within the time limit.
Do you have any additional questions regarding the Counter-Guarantee?
Our experts will be pleased to answer any questions regarding a Counter-Guarantee. Please do not hesitate to contact them.
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