Use standby letters of credit to facilitate a variety of transactions with third parties. A standby letter of credit is an obligation of the Bank to make payment to a third party if a member or housing associate does not perform its underlying obligation to that third party.
- Facilitate residential housing finance and community lending
- Assist with asset/liability management
- Provide liquidity or other funding
- The credit enhancement provided by the Bank’s standby letters of credit may reduce your financing costs.
- Because the Bank is rated Aaa by Moody's and AA+ by Standard & Poor's, Bank letters of credit may enable you to obtain an Aaa or AA+ rating on tax-exempt bond and note transactions that you support.
- You may also be able to use Bank letters of credit to obtain an Aaa or AA+ rating on your issuance of commercial paper or medium-term notes.
- Bank letters of credit may be used to collateralize interest rate swap transactions. (Please check with your counterparty for eligibility.)
- In Arizona, Bank letters of credit may be used to collateralize public deposits through the Arizona Pooled Collateral Program. (Contact the Arizona State Treasurer’s Office for program requirements.)
- In California, Bank letters of credit may be used to collateralize Local Agency or State deposits. (Contact the Local Agency Administrator or the California State Treasurer’s Office for program requirements.)
- In Nevada, Bank letters of credit may be used to collateralize public deposits through the Nevada Collateral Pool. (Contact the office of the State Treasurer of Nevada for program requirements.)
- Bank letters of credit are competitively priced.
The purpose of the letter of credit and the underlying transactions must meet the Bank’s guidelines for eligible uses described above.
The letter of credit amount must be fully secured with eligible collateral at all times.
No Bank stock purchase is required.
If the Bank makes a payment to a beneficiary under a letter of credit, the Bank will charge the member’s or the housing associate’s Settlement/Transaction Account (STA) for the amount of the payment. The member or housing associate must make a deposit to its STA the same day or arrange for an advance to do so.
The Bank will charge applicable prices and fees for standby letters of credit, which may include an issuance fee, annual maintenance charge, processing fee for each drawing, and amendment fee.
Last Modified: April 2015