What is Bank Guarantee??

Hi guys,

What is this bank guarantee? Can you explain more on this? Do we also can get bank guarantee when we apply for iPO?

Your comments are very valuable.

ss7097 wrote:Hi guys,

What is this bank guarantee? Can you explain more on this? Do we also can get bank guarantee when we apply for iPO?

Your comments are very valuable.

A surety is a person (or company) who agrees to be responsible for the
debt or obligation of another. Furthermore, a surety is also a "security
against loss or damage or for the fulfillment of an obligation, the
payment of a debt, etc.; a pledge, guaranty, or bond."

Dear ss7097,

Please read the following article to get more knowledge about bank guarantee and relation between bank guarantee and IPO:

(Source: Lanka Business Online)

Recent initial
public offers on the Colombo bourse have seen massive
over-subscriptions, with many big investors using bank guarantees to
apply for shares.



"As
little as five or ten percent collateral was used by some investors for
bank guarantees when applying for IPO shares," a stock market analyst
said.
Some big investors are reported to have applied for the entire issue
using bank guarantees, with the bank liable in the unlikely event all
shares applied for are given.
"Using only five percent collateral for grantees can be quite irregular
and can also be rather risky in terms of conventional banking," the
analyst said.
Stock brokers and analysts said the massive IPO over subscriptions
helped by bank guarantee, gives the share an overall artificial hype,
making its stock an 'in-demand' commodity, encouraging buying by retail
and new investors.
However, officials in the market regulator, Securities and Exchange
Commission said the oversubscriptions are merely the effects of supply
and demand and that there is no regulation needed at this point.
"However, what happens is that when trading of the stock begins
officially the big players sell early making a profit while the smaller
investor holds on to his stock and by the time he decides to sell
usually the stock price has dropped," an analyst said.

"Lots of small investors can be discouraged because of this scenario and can also get driven away from trading," he said.
The banking regulator, the Central Bank, sees the share transaction as too small to pose any systemic risk.
Central bank's deputy governor, Dharma Dheerasinghe says the regulator
is not worried about bank guarantees for IPO applications as they are
not massive transactions and that its bank supervision division is aware
of what is going on.
"Earlier these investors were using cheques to do these transactions but
because of cheque floats there were some complications and now bank
guarantees are used instead."
Dheerasinghe said there is room for higher credit to the private sector
from commercial banks and that the central bank wants to encourage
investors to participate more actively in daily market trading.
Some 378 big players on the Colombo bourse applied for large quantities
of shares in the recent Singer Finance (Lanka) IPO which was
over-subscribed by a record 135 times, mostly using bank guarantees.

The Singer Finance IPO offered 26.7 million shares at 15 each.
Traders who applied for all the IPO shares by using the bank guarantee
would have had to pay close to 500,000 rupees to the bank for the
facility and get about 100,000 shares in return.
Brokers say that other recent IPOs have also been massively oversubscribed, again mostly with bank guarantees.
The Odel IPO in July was oversubscribed by 63 times with a record 22,686
applications received from the public with a cumulative value of over
15.9 billion rupees.
Some banks are reported to have earned about 30 million rupees from the
Singer Finance IPO by issuing bank guarantees, analysts said.

machan ada shot ekak da gathe nadda ?

Meta Trader wrote:machan ada shot ekak da gathe nadda ?

Still in normal.When Sri Lankan team start to Bat I ll become abnormal.
What about you.....Shall we meet at Parliament Grounds.I hope to go there to watch the Match in Mega Screen.

MarketResearch wrote:

Meta Trader wrote:machan ada shot ekak da gathe nadda ?

Still in normal.When Sri Lankan team start to Bat I ll become abnormal.
What about you.....Shall we meet at Parliament Grounds.I hope to go there to watch the Match in Mega Screen.

Go for the shot after the match. Enjoy the match when you are in normal.

MarketResearch wrote:

Meta Trader wrote:machan ada shot ekak da gathe nadda ?

Still in normal.When Sri Lankan team start to Bat I ll become abnormal.
What about you.....Shall we meet at Parliament Grounds.I hope to go there to watch the Match in Mega Screen.

Monster wrote:

MarketResearch wrote:

Meta Trader wrote:machan ada shot ekak da gathe nadda ?

Still in normal.When Sri Lankan team start to Bat I ll become abnormal.
What about you.....Shall we meet at Parliament Grounds.I hope to go there to watch the Match in Mega Screen.

Go for the shot after the match. Enjoy the match when you are in normal.

Yeah.Good suggestion.

MR your reputation + now, show us your happiness using a poem

micky wrote:MR your reputation + now, show us your happiness using a poem

Minus walin awa "plus" club ekata
Thank you kiyanawa sematama pull ekata
Vindaganu kemathi oba samagin jaya sathuta
Nogihin kohoma ada nam mama club ekata

MarketResearch wrote:

micky wrote:MR your reputation + now, show us your happiness using a poem

Minus walin awa "plus" club ekata
Thank you kiyanawa sematama pull ekata
Vindaganu kemathi oba samagin jaya sathuta
Nogihin kohoma ada nam mama club ekata

wow nice macho. i'm happy to see your happy,funny and friendly words

kiri wrote:

MarketResearch wrote:

micky wrote:MR your reputation + now, show us your happiness using a poem

Minus walin awa "plus" club ekata
Thank you kiyanawa sematama pull ekata
Vindaganu kemathi oba samagin jaya sathuta
Nogihin kohoma ada nam mama club ekata

wow nice macho. i'm happy to see your happy,funny and friendly words

Cheers.

Senior guys,

Pl dont act fools here. Somebody has asked a question and look the answers. All nonsense!

In simple, ther is no injustice to small investors(like us0 as ther are munimum allocation. at the same time, there is no systematic risk as the value of entire issue Rs 350.00 which is not going to be "zero"

Thats undertand, let try to discuss the "Bank guarantee" which is the original question

salt wrote:Senior guys,

Pl dont act fools here. Somebody has asked a question and look the answers. All nonsense!

In simple, ther is no injustice to small investors(like us0 as ther are munimum allocation. at the same time, there is no systematic risk as the value of entire issue Rs 350.00 which is not going to be "zero"

Thats undertand, let try to discuss the "Bank guarantee" which is the original question

Dear Salt,

Please refer my first and second replies.The answer for the Bank Guarantee.If you know something please post it.

Thanks.