A Letter of Credit (LOC) from FHLB Des Moines is a product issued to guarantee payment for a member institution.
Letters of Credit are used for a variety of purposes, most commonly as an attractive alternative to pledging securities for public unit deposits. LOCs can also be used on other qualifying transactions: performance guarantees for a number of purposes, as well as bond issuances for community improvement projects, for example, to improve the credit rating, thus lowering the cost of a project. The Bank's credit standing and capital market access can be accessed for the benefit of members, and on a conforming basis, also for the benefit of their customers. Letters of credit issued by “Aaa/AA+ rated FHLB Des Moines are accepted by multiple counterparties.
| Purpose |
Performance Guarantee |
Public Funds Deposits |
Bond Issuance Credit and Liquidity Enhancement |
| Use |
Supporting performance obligations for:
- Contracts, bids
- Project completion
- Lease payments
- Self-funded workers compensation liability, unemployment and other insurance programs
- Interest rate swap counterparty guarantees
|
Collateralizing public unit deposits exceeding insured limits |
To provide:
- Taxable and tax-exempt housing issuances
- Taxable community economic development projects
Includes: housing, construction, jobs-producing and commercial revitalization projects, schools and health care
|
| Leverage FHLB Des Moines “Aaa/AA+” credit rating |
X
|
X
|
X
|
| Irrevocable Structure |
X
|
X
|
X
|
| Prompt payout to customer in the event of a draw request |
X
|
X
|
X
|
| Structure |
Confirming
|
Standby
|
Confirming
|
| Annual Auto-Renewal |
X
|
X
|
X
|
| Issuance within 24 hours |
X
|
X
|
X
|
| No Need to Pledge and Monitor Securities |
X
|
X
|
|
| Fee Income Opportunity |
X
|
|
X
|
| Liquidity Ratio Improvement |
|
X
|
|
| Customer Relationship Enhancement |
X
|
X
|
X
|
| Competitive Pricing |
X
|
X
|
X
|
Please contact the Money Desk with questions about Letters of Credit or for additional assistance and details.