Municipal Letters of Credit (MULOCs)
|Term:||2 weeks to 3 years|
||$100 Draw Fee
(if there is a default on the L/C)
MULOCs provide a low–cost, more efficient way to collateralize state, city, court, or local government (municipal) deposits.
Several states, including New York and New Jersey, have amended their laws to permit the use of MULOCs as eligible collateral. In addition, New York thrift members are eligible to use FHLBNY MULOCs to secure local government (municipal) deposits if they are located in designated Banking Development Districts.
FHLBNY MULOC Benefits for Members
When MULOCs are used to collateralize state, city, court, or local government (municipal) deposits, they:
- Utilize the FHLBNY's triple-A credit rating to secure deposits
- Increase a member’s liquidity position by freeing up the securities portfolio for other uses
- Increase earnings on the investment portfolio (MULOC can take the place of lower-yielding investments, such as Treasuries)
- Reduce the operational expense associated with monitoring deposits (eliminates the need to match CUSIPs, monitor principal paydowns, monitor securities calls, etc.)
Refundable MULOCs are also available to collateralize transaction accounts more effectively and have the potential to lower FHLBNY MULOC fees…more