• THE INTERNATIONAL COMMERCE & LAW REVIEW
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• v.39
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• pp.87-103
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• 2008

Two kinds of security devices such as independent guarantees and standby letters of credit have been widely used in the international transactions. These devices design to protect one of the parties from a breach by its counter-party. Main uses of these guarantees and standby letters of credit are as follows : bid guarantee, performance guarantee, advance payment guarantee, payment guarantee, retention guarantee, etc. The standby letters of credit were first invented in the U.S.A. and have been widely used in the international and domestic contracts in the U.S.A. But the practical use of these credits is very unsatisfactory in Korea. The purpose of this study is to serve the increase of practical use of the standby letters of credit in Korea through the comparison study on the practical use of the credits between Korea and the U.S.A. Both devices are very similar in function, but they are very different in forms. The one has the form of letter of credits but the other has the form of guarantee. The letter of credit has the stability of governing rule, the legal certainty, and the preference in the field of the trade community comparing to the guarantee. I recommend to use standby letter of credit instead of bank guarantee in international transactions because of the merits of the credit aforesaid.

• Journal of Arbitration Studies
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• v.34 no.2
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• pp.45-64
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• 2024

In international transactions, a demand guarantee is commonly used as a so-called independent bank guarantee to protect against the other party's default under, or breach of, contract). However, there is a risk that the independence and the documentary character of the demand guarantee may be abused by the beneficiary of the guarantee, who may fall into the temptation to demand or call for payment under the guarantee by preparing documents that appear to constitute a complying demand for payment, even though the demand has no conceivable basis. In Korea, through case law, a legal rule has been developed to prevent such abusive calls for payment. This paper examines how such rule that prohibits abuse of rights is applying in the context of counter-guarantees. To this end, this paper first considers the concepts of a demand guarantee and a counter-guarantee and the basic legal principles applicable thereto. And then this paper considers abusive calls under the guarantees, that exceptionally works as grounds for refusal of payment by guarantors and counter-guarantors, further looking at some situations in which the calls amount to be abusive under counter-guarantees in particular.

• International conference on construction engineering and project management
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• 2011.02a
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• pp.399-406
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• 2011

Various construction bonds and warranties critically burden the general contractor. Also, sporadic or cumulative delays of progress payment by the owner can further trap the contractor in a financial quagmire. Facing the possibility of cash flow deficiency and callous response from the banks, most construction firms may become financially incapable of market competition, and attractive project tenders become a bidding game among few deep-pocket players. The downside of such market environment is that the depth of pocket, rather than that of professional competency dictates the choice of market winners. In Taiwan, this has been a potential crisis to the construction industry after the financial crisis which started out since 2008. To encounter this problem, this research will examine the means to better manage the construction industry. Essentially, a credit guarantee system (CGS) is the prime solution to strengthen a bank's confidence in any particular construction firm. Thus establishing a national platform which evaluates and rewards a construction firm's overall credibility is pivotal, and this third-party rated credit can help a bank to render a loan more wisely. Finally, this paper will propose the ideal operating schemes of construction-specific CGS in Taiwan and a credit scoring prototype model for construction industry, as reference for the government and banks, respectively.

• Korea Trade Review
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• v.47 no.5
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• pp.115-128
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• 2022

This paper reviewed "unconscionability" as an exception to the independence principle of bank guarantees. Apart from fraud which has been recognized in most international jurisdictions, Uuconscionability would also be recognized as the exception to the legal principle, the so-called "fraud rule" or "an abuse of rights." Unconscionability exception is applied in the same manner as fraud and other exceptions to the principle of independence. The exception should allow guarantor to dishonor the drawings that abuse the independence principle. However, outright or manifest facts of the unconscionability must be established in order to apply the exception. Lots of arguments or conflicts may be caused in applying the unconscionability exception. Therefore, this study aims to prevent institutional abuses or to reduce the disputes from setting up the legitimate scope and standard for application of the exception by reviewing these procedural issues and problems under bank guarantee transactions. This paper also suggested practical implications and countermeasures for the institutional application.

• Journal of the Korean Operations Research and Management Science Society
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• v.37 no.2
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• pp.17-29
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• 2012

We examine a mortgage bank's incentive distortion problem when the bank sells its existing loan through MBS(Mortgage-Backed Security), considering the mortgage market structure and varying investors' risk attitude. Main findings in our comparative statics are the followings. The bank's monitoring incentive on the loan sold is distorted downwards when the deposit interest rate is lower than the coupon rate of MBS. Credit enhancement associated with the loan sale may mitigate the incentive distortion problem. However, the downward distortion of monitoring incentive does not disappear unless the credit enhancement, a loan guarantee, is provided up to 100%. Finally as the investors' risk preference changes from risk-neutral to risk-averse type, the incentive distortion problem becomes more severe. At the end, we recommend the introduction of covered bond in order to mitigate the incentive distortion problem, which is inevitable to current pass-through MBS.

• International Commerce and Information Review
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• v.15 no.2
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• pp.25-47
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• 2013

In China, the commercial bank credit financing is the most important external financing channel for SMEs. However, the lack of credit guarantee significantly deters commercial banks to finance SMEs. which may generate a negative impact on the trade activities of SME in China. In this paper we examine the risk of credit guarantee for SMEs financing and the factors affecting this risk through a VAR (Value-at-Risk) model. Our analysis shows that the scale of enterprises' impact on the VAR (risk of financing guarantee) is not much relevant. We also find that the certainty of financing for SMEs, such as the fixed asset ratio, has a significant and negative effect on the VAR of Chinese credit guarantee institutions. The product uniqueness is positively correlated with the VAR, and operation risk is also positively related to the credit risk of Chinese credit guarantee institutions.

• International Journal of Fuzzy Logic and Intelligent Systems
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• v.5 no.2
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• pp.114-118
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• 2005

Recently, in order to guarantee the quality of the final product from the production line, several equipments able to examine the polymer ingredients' quality are being used. Rheotruder is one of the equipments manufactured to measure the viscosity of the ingredient that is an important factor for the quality of final product. However, Rheotruder has nonlinear characteristics such as time delay which make systematic analysis difficult. In this paper, in order to enhance the performance of Rheotruder, a new scheme is introduced. It incorporates TDNN (Time Delay Neural Network) bank and Elman network to get a right decision on whether the tested ingredient is good or not. Furthermore, the proposed scheme is verified through real test execution.

• Journal of Korea Society of Industrial Information Systems
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• v.6 no.2
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• pp.54-62
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• 2001

In this paper, we proposed multimedia based ExamBank system in web environments. In the proposed system the database was designed based on the object-relation model and the application program was implemented with Java such that independent execution would be possible to guarantee no fault for multi-client in Web environments. We defined the Exam entities as objects, and implemented those inter-relationships as user definition and type. In addition, by mapping the schema object of DBMS and JAVA class, it becomes to possible transferring the object systematically between DHMS and JAVA application server.

• Journal of Information Technology Services
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• v.6 no.1
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• pp.31-45
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• 2007

With the announcement of Basel II Accord in 2004, worldwidebanks have been strengthening their risk management system. Under the circumstances, S became the first bank among other financial institutions in Korea to establish bank-wide BCP process that goes beyond the past Disaster Recovery Planning or DRP. Considering that the purpose of the process is to guarantee stability of work under the real disastrous situation, other banks are anticipated to introduce the process sooner or later to cope with any possible disaster and adhere Basel II Accord. The purpose of this thesis is to see how much impact does the work process or its improvement would have on employees' satisfaction level by considering Recovery Time Objectives (RTO) via Business Impact Analysis (BIA) and influence of BCP process implementation on parties involved.

• Journal of the Korean Operations Research and Management Science Society
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• v.34 no.2
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• pp.1-13
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• 2009

In this paper, we develop theoretical game models to determine the level of government subsidies for banks to provide policy loans to Innovative SMEs(small and medium sized enterprises) through banks, which otherwise would not finance them for the sake of their own profitability. For this, we compare net cash flows of each bank using different strategies against high risk innovative SMEs. A bank can decide whether to provide them loans or not In each period. Following Kim(2003)'s Infinite horizon model on the soft budget constraint, we introduce a situation in which banks compete against each other for higher net long-term payoffs from their loans to innovative SMEs and non-innovative SMEs. From the models, we show that competition among banks in general leads to a tighter decision against innovative SMEs, as a Nash equilibrium. It is not because the government bank is simply loose in providing loans, but because competition among commercial banks for fewer riskier borrowers results in tighter loan decisions against innovative SMEs. Thus, the competitive market for policy loans to innovative SMEs fails to reach the socially optimal level of loans for innovative SMMs. Commercial banks in the competitive market may require additional supports from the government to make up for the differences in their payoffs to support innovative SMEs, possibly much riskier due to moral hazards and poor discounted cash flows. The monopolistic government bank might also request such supports from the government to fund otherwise unqualified SMEs. We calculate an optimal level of governmental support for banks to guarantee funding such high-risk innovative SMEs over periods without deviating from their optimal Nash equilibrium policies.