Municipal Letters of Credit (“MULOCs”)
| Term: | 2 weeks to 3 years |
| Cost: |
.125% per annum (based on a 365-day year) |
| Fees: |
$100 Draw Fee (if there is a default on the L/C) |
MULOCs provide a low–cost, more efficient way to collateralize state, city, court, or local government (municipal) deposits.
Commercial banks and qualified savings and loans or savings banks are eligible to use an HLB MULOC as collateral under New York and New Jersey law. New York thrift members are eligible to use HLB MULOCs to secure local government (municipal) deposits if they are located in designated Banking Development Districts.
HLB MULOC Benefits for Members
When MULOCs are used to collateralize state, city, court, or local government (municipal) deposits, they:
- Utilize the HLB's AAA credit rating to secure deposits
- Free up the securities portfolio for other uses
- Increase earnings on the investment portfolio (MULOC can take the place of lower-yielding investments, such as Treasuries)
- Allow for the pledging of securities elsewhere (i.e., for advances to reduce cost of funds)
- Reduce the operational expense associated with monitoring deposits (eliminates the need to match CUSIPs, monitor principal paydowns, monitor securities calls, etc.)
- Eliminate the need to match securities and monitor margin calls
Refundable MULOCs are also available to collateralize transaction accounts more effectively and have the potential to lower HLB MULOC fees…more
