N.Y. Comp. Codes R. & Regs. tit. 3 § 77.5

Current through Register Vol. 46, No. 53, December 31, 2024

Section 77.5 - Letters of credit

For purposes of sections 235(8-c) and 380-k of the Banking Law, a commercial, corporation or business loan shall be deemed to include commercial letters of credit and standby letters of credit as a category of commercial loan transaction so long as they meet the requirements of this section. However, all amounts to be drawn under commercial letters of credit and the amounts for which a savings bank or savings and loan association makes a commitment under a standby letter of credit are to be aggregated and shall usually be considered unsecured loans. Consequently, they shall be subject to the 15 per centum unsecured loan limit per borrower. The following requirements apply to commercial letters of credit and to standby letters of credit:

(a) each letter of credit must conspicuously state that it is a letter of credit;

(b) the institution's undertaking must contain a specified expiration date or must be for a definite term;

(c) the institution's undertaking must be for a stated and limited amount;

(d) the institution's obligation to pay must arise only upon presentation of a draft or other documents as specified in the letter of credit and the institution must not be called upon to determine questions of fact or law at issue between the parties to the underlying transaction; and

(e) the customer of the institution must have an unqualified obligation to reimburse the savings bank or savings and loan association for payments made under the letter of credit.

All amounts representing obligations entered into under commercial or standby letters of credit must be reported to the Board of Trustees of the savings bank or the Board of Directors of the savings and loan association in the same manner as set forth for loans in section 252 of the Banking Law.

N.Y. Comp. Codes R. & Regs. Tit. 3 § 77.5