Series 53: Letter Of Credit (LOC)

Taken from our Series 53 - MSRB Municipal Securities Principal Qualification Exam

Definition of the term Letter Of Credit (LOC)...

a widely-used form of credit enhancement in which a commercial bank with a high credit rating makes an irrevocable commitment to honor the payment obligations of a municipal bond. As a result of the LOC, the bank’s credit rating transfers to the issuer.

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