80-4

Los Angeles Office

July 14, 1980

Re: Stand-By Letters of Credit

Dear Mr. ________:

This is in reference to your letter of ________.

Your question was whether a stand-by letter of credit accepted by your bank to support a letter of credit issued by your bank would be considered a secured loan.

Our opinion would be that a loan supported by a stand-by letter of credit would not be considered a secured loan for lending limit purposes. A stand-by letter of credit resembles a guaranty and is not eligible personal property pursuant to Financial Code Section 1223. In your letter you also make reference to letters of credit to be supported by a stand-by letter of credit accepted by your bank. It should be pointed out that pursuant to Financial Code Section 1224, a bank may issue letters of credit and letters of credit per se are not subject to the lending limits unless the letters of credit are stand-by letters of credit. Such stand-by letters of credit would by way of Section 337.2 of the FDIC Regulations be subject to state legal lending limits.

Should you have any further questions regarding this matter, please do not hesitate to contact us.

Very truly yours,

RICHARD M. DOMINGUEZ
Superintendent of Banks

By

DIANA H. NISHIURA
Counsel

DHN:na

cc: J. F. Carrig, S.F.

State banking Department, S.F.