Thread Options
#2221452 - 09/12/19 12:29 AM Letters of Credit
Half Pint Offline
Member
Joined: Sep 2012
Posts: 76
Pennsylvania
I have 3 Member Business Loan's for about $400,000 which is well below our aggregate 15% of net worth limit to one member.

However, they also need 2 Letters of Credit for $447,000 and $305,000 with the township as a beneficiary. Do the Letter of Credit count against the aggregate limit?

Return to Top
Lending Compliance
#2221461 - 09/12/19 01:46 PM Re: Letters of Credit Half Pint
rlcarey Online
10K Club
rlcarey
Joined: Jul 2001
Posts: 79,236
Galveston, TX
Aggregate lending limits are going to be defined in your specific regulations that apply to you. Since you used the term "members" we can assume that you are a Credit Union. The next question is are you a Federal or State chartered Credit Union. Only then can you determine how credit is defined.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#2221480 - 09/12/19 05:00 PM Re: Letters of Credit rlcarey
Half Pint Offline
Member
Joined: Sep 2012
Posts: 76
Pennsylvania
Federal

Return to Top
#2221484 - 09/12/19 05:37 PM Re: Letters of Credit Half Pint
rlcarey Online
10K Club
rlcarey
Joined: Jul 2001
Posts: 79,236
Galveston, TX
You might want to review Section 701.21(c):

(5)Ten percent limit. No loan or line of credit advance may be made to any member if such loan or advance would cause that member to be indebted to the Federal credit union upon loans and advances made to the member in an aggregate amount exceeding 10% of the credit union's total unimpaired capital and surplus. In the case of loan participations as defined in § 701.22(a) of this part and commercial loans as defined in § 723.2 of this chapter, additional limitations apply as set forth in § 701.22(b)(5)(iv) of this part and § 723.4(c) of this chapter.

723.2 Commercial loan means any loan, line of credit, or letter of credit (including any unfunded commitments), and any interest a credit union obtains in such loans made by another lender, to individuals, sole proprietorships, partnerships, corporations, or other business enterprises for commercial, industrial, agricultural, or professional purposes, but not for personal expenditure purposes.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#2221503 - 09/12/19 07:47 PM Re: Letters of Credit Half Pint
Half Pint Offline
Member
Joined: Sep 2012
Posts: 76
Pennsylvania
Thank you!

Return to Top

Moderator:  Andy_Z