Letters of Credit
Overview Regular L/Cs MULOCs Additional Information

 

 

Calling Officers
(212) 441-6700

 

What is a Letter of Credit?

A letter of credit (L/C) is a credit instrument, issued by a financial institution, guaranteeing payment on behalf of its customer to a beneficiary, normally to a third party but sometimes to the institution’s customer, for a stated period of time and when certain conditions are met.  An FHLBNY L/C substitutes the issuing institution’s (FHLBNY member-lender’s) credit for the credit of the FHLBNY.

The FHLBNY's L/C process:

 

The FHLBNY issues two types of L/Cs:  Irrevocable Standby or Irrevocable Direct Pay.

Irrevocable Standby L/C:

Provides that the FHLBNY pay out to the beneficiary in the event of a member's default or failure to perform under a contract or other agreement between parties.

Irrevocable Direct Pay L/C:

Permits the beneficiary to look directly to the FHLBNY for payment of a member’s obligation.  It cannot be cancelled before a specific date without the agreement of all parties involved.

 

 

 

Calling Officers
(212) 441-6700

 

 
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