Standby Letters of Credit

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.

Eligible Uses

• Facilitate residential housing finance and community lending
• Assist with asset/liability management
• Provide liquidity or other funding

 
Key Advantages

• The credit enhancement provided by the Bank’s AAA-rated standby letters of credit may reduce your financing costs
• Bank letters of credit may enable you to obtain a AAA rating on tax-exempt bond and note transactions that you support
• You may also be able to use Bank letters of credit to obtain the highest possible 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 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.)
• Bank letters of credit are competitively priced

 
Key Features
 
Purpose
The purpose of the letter of credit and the underlying transactions must meet the Bank’s guidelines for eligible uses described above.
 
Maximum Term
10 years
 
Collateral Requirements
The letter of credit amount must be fully secured with eligible collateral at all times.
 
Stock
No Bank stock purchase is required.
 
Payment Reimbursements
If the Bank makes a payment to a beneficiary under a letter of credit, the Bank will charge the member’s Settlement/Transaction Account or the housing associate’s transaction account for the amount of the payment. The member or housing associate must make a deposit to its account the same day or arrange for an advance to do so.
 
Fees
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 2004


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