Not a term of art, and generally a reference to an undertaking by a bank to cover a debt owed by a company or individual under a transaction. A bank guarantee is sometimes an alternative to security which would be granted by a company in respect of its own indebtedness. The issuing bank will usually require a counter-indemnity and payment of a fee, or some form of security or quasi-security, from the company which is being guaranteed.

The document issued will generally be a guarantee in the legal sense, but may be another form of undertaking, such as an on-demand bond.

For more information on guarantees and performance and other on-demand bonds, see Practice notes, Guarantees and indemnities and Bonds, guarantees and standby credits: overview.