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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

Key Advantages

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

15 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 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.

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 2015