Document background
The Performance Bank Guarantee is a crucial document in Indonesian business transactions, particularly in construction, infrastructure, and large-scale projects. It serves as a risk mitigation tool where a bank provides financial security to a project owner against potential non-performance by a contractor or supplier. Under Indonesian law, these guarantees are regulated by Bank Indonesia and the Financial Services Authority (OJK), requiring specific formatting, content, and execution procedures. The document becomes necessary when a contract requires performance security, typically ranging from 5% to 10% of the contract value. The Performance Bank Guarantee includes detailed information about all parties involved, the underlying contract, guarantee amount, validity period, and claim conditions. It's particularly important in government contracts and large commercial projects where substantial financial interests need protection.
