Savings Bond as Collateral

by Mary Beth Guard, BOL Guru

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.

First published on BankersOnline.com 03/24/02