Question: I had a customer request to pledge savings bonds as collateral on a loan. I
wasn't sure if we could legally do this. I know we would have to take possession of the bonds and do a safekeeping agreement, but didn't know if we would have the right to offset against it if the loan defaulted.
Answer: According to the Bureau of Public Debt (the federal government entity which oversees savings bond issues), savings bonds may not legally be used as collateral for a loan or as security for the performance of an obligation. Your customer cannot pledge his savings bonds as collateral for a loan.
This page contains the prohibition against savings bonds being used as collateral.
The original version appeared in the October 2002 edition of the Oklahoma Bankers Association Compliance Informer.
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