Letters of Credit

Letter of Credit Resources

Standing Behind Member Obligations

Members use FHLBank Pittsburgh's highly rated standby letters of credit (LCs) to collateralize public unit deposits, credit enhance transactions with third parties and facilitate a variety of other financing transactions.

About Standby LCs

We stand behind our members' obligations by offering a number of standby LCs: LCs for public unit deposits, confirming LCs and direct pay LCs. FHLBank Pittsburgh LCs are issued to a beneficiary on a member's behalf, independently supporting the member's obligation.

Please note that FHLBanks are not permitted to issue commercial LCs or LCs to foreign beneficiaries.

LC Benefits

Safe, efficient and easy to use, LCs offer members substantial benefits.

  • Safety - Obligations to third-party beneficiaries are backed by an irrevocable, independent obligation from FHLBank Pittsburgh.
  • Liquidity - LCs can be substituted for pledged assets resulting in more available liquidity.
  • Efficiency - Online execution of routine LCs allows for same-day issuance.
  • Flexibility - Customizable terms available to meet members unique and evolving business needs.
View the LC product profile for more information about LCs and the benefits of member participation.
Our LCs can be used as an alternative to securities collateral for securing public unit deposits in excess of the level insured by the Federal Deposit Insurance Corporation (FDIC). Within our district of Delaware, Pennsylvania and West Virginia, the use of LCs is permitted to secure public funds held by municipalities, school districts and other public depositors. In fact, LCs issued by FHLBank Pittsburgh are acceptable collateral in 47 states, the District of Columbia and the U.S. Virgin Islands.

To be sure that a customer and its deposits meet the Federal Deposit Insurance Corporation's (FDIC's) definitions of a "public unit," please visit www.fdic.gov/deposit/deposits/factsheet.html.

To support our members' business development efforts, FHLBank Pittsburgh members can access a printable LC Beneficiary Flyer to help attract and retain public unit customers and prospects. This flyer may be customized with a logo and specific call-to-action.

Confirming LCs function as a second-pay arrangement in which a member has issued its own LC and is seeking to improve the credit terms of the transaction by leveraging FHLBanks Aaa/AA+ rating (Moody's/S&P).

These can be valuable tools to support a member's community lending activities, including arranging financing to support bond issuances for community and economic development projects as well as affordable housing projects. Confirming LCs issued by FHLBank Pittsburgh can also be used to support other member obligations to third parties.

A Direct Pay LC provides members with an option to enhance credit terms of transactions by using FHLBank Pittsburgh as the primary payment source. This can be advantageous where the beneficiary requires the payment source to carry a high-quality credit rating with a low degree of risk.
Master LCs allow members to support the fluctuating deposit balances of multiple public entities via a trust arrangement. View the Master LC flyer for more information.

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