Someone indicated to me that when a letter of credit is drawn on, we should report the amount drawn; however, the only information I can locate regarding letters of credit and CRA indicate that we do not report letters of credit. Does anyone know the answer to this?

I've always had the same impression, that you didn't report letters of credit unless they were drawn on. If they are, you report the balance.

I think managing this is a little difficult for most of us. I plan on running a special report of all LCs and then looking to see if they are reportable.

How are others handling this?

Dolly Nugent
VP/Compliance & CRA Officer
Citizens Business Bank

The reason for reporting on the draw but not on the letter is that the letter by itself isn't credit. It only becomes credit when the customer makes a draw. Then the transaction is reportable.

I am not impressed with this limited reasoning because I think that the letter indicates a willingness and a commitment to lend. That ought to count under CRA. Perhaps someday....

Is it true, that you would have to provide this info to the examiners voluntarily because this isn't something they would normally review?

Looking at FFIEC's Website:::::::
Section .42 -3 How should an institution report datea on lines of credit?

It appears to state-------

For CRA reporting (LOCs) are reported at origination. The full amount is reported. They are considered originated at the time the loan is approved. Each increase to an existing lis is consider originated.

Renewals of LOCs are reported as you would report a renewal of a small business or small farm loan...if applicable. Only one origination, extension or renewal may be reported in the year.

Am I understanding this wrong?

[This message has been edited by Kathy Lafleur (edited 01-03-2002).]

Well, just pardon my response and slap me silly. I am looking at Lines of Credit and Cindy is questioning Letters of Credit.....

Sorry...guys and gals.

Kathy: Silly? I dont think so. No way.

Wrong? Maybe, but, if so, you still make Lucy's point quite well.

After all, what really is the diff btwn a letter of credit and line of credit from the perspective of a bank's commitment to lend or obligation to fund?

Granted, some letters of credit have documentation conditions that must be met before the bank has to honor a draw (rather than a simple request or issuance of a check for a line of credit), but I think Lucy's right (pardon me if im putting words in her mouth) that this is a distinction w/out a difference.

I AM NOT ENGAGED IN PROVIDING LEGAL ADVICE AND THE VIEWS EXPRESSED ARE NOT THOSE OF MY EMPLOYER

I like those words! I think I'll keep them.

I believe we canot get CRA credit for the following but I want to make sure I'm not missing anything:

Bank issued an Irrevocable Stand-by Letter of Credit to Habitat For Humanity in the amount of $69,000. Purpose is for bonding the completion of required infrastructure for a particular subdivision which will provide residential lots for Habitat's building program. All homes will be built for families with income at or below 50% of the median income in our area.

CRA Q&A .42(c) "Optional Data Collection" states that banks not required to collect info. on L/C but that we can provide this info. to examiners for consideration.

Am I reading this correctly? We keep the info. in our files only but don't report at all? Thanks in advance for any responses.