Financial security

Financial security is the cover an agency provides to IATA against the amount it has at risk in the BSP. In practice it is often a bank guarantee. The amount is calculated under the Local Financial Criteria of the market, or under the multi-country or Euro-Zone criteria where those apply 4.

When it is required:

• Before accreditation, a Standard Agent with Cash Facility, a Multi-Country Agent or a Euro-Zone Agent must provide one, and it must stay in place for at least the first two years 4.
• After the first two years, it may still be needed depending on the agent's Risk Status 4.
• The Handbook also lists other triggers: a short or late payment, reinstatement after a default, financial statements that fail the criteria, and a change in ownership or control of 30% or more of the stock 1. A minor error rule can waive the requirement once in a twelve month period if the bank evidences that the funds were available on the remittance date and payment was made within the demand period 1.

It is tied to the Remittance Holding Capacity (RHC). Extra security raises the RHC by the same amount unless local criteria say otherwise 6. If IATA requests more security because sales have grown and the agent cannot provide it by the deadline, IATA adjusts the RHC. If the security is below the required amount, the RHC is lowered to match it 4.

In practice, monitor your sales against the security you hold, and answer any IATA request for an increase on time. Check the local rules of your market for the issuing bank, the template and the replacement deadlines, as these vary. Some markets require the bank to be licensed locally and the security to follow the IATA template 8. IATA may also move a market to digital confirmation and require paper guarantees to be replaced 3.