Letter of Credit

Description
Letters of credit offer irrevocable performance bonds. Should the letter be drawn upon, the FHLBI will issue an advance under the agreed-upon program, usually a variable rate advance.

Term
Up to 10 years, depending on purpose. When used as surety for a third-party interest rate swap, term may extend up to 20 years.

Application
Call the FHLBI to initiate application.

Fees
A fee (up to 3/8%) based on the approved principal amount will be payable annually on the issue date and its anniversary dates with a minimum fee of $1,000. In addition, an administrative fee will be charged for each draft presented for payment under the letter of credit. The FHLBI may also charge an up-front fee for letters of credit requiring additional research, unique documentation, or the use of outside legal counsel. A fee of $5,000 will be charged for early termination of the letter of credit.

Collateral
A letter of credit must be secured as any other advance would be and is subject to regular borrowing limits. Collateral requirements and capital stock holdings will be adjusted at the time the letter of credit is issued.

Cancellation
A letter of credit may be canceled subject to the terms of the agreed
upon transaction.

Purpose
The FHLBI will consider requests to issue standby letters of credit on behalf of member institutions for any of the following purposes:

a. To assist members in facilitating residential housing finance,
b. To assist members in facilitating community lending that is eligible for any of
    the FHLBI's community investment programs,
c. To assist members with asset/liability management, and
d. To provide members with liquidity and other funding.

Updated: February 25, 2008