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Letter of Credit PUD Application

Like most states and municipalities which require financial institutions to pledge high-quality collateral (e.g., government securities such as U.S. Treasuries) to secure public unit deposit balances in excess of the FDIC insurance limits, members obtaining deposits through participation in our Public Unit Deposit Program (PUD) must also provide collateral to the Local Government Investment Pool (LGIP) from which the deposits were obtained. However, unlike the traditional methods of collateralizing public unit deposits by pledging collateral like securities, deposits obtained through the PUD Program must be collateralized by an FHLB Des Moines Letter of Credit.

Using an FHLB Des Moines Letter of Credit for the PUD program allows members to leverage less-liquid collateral that is pledged to the Bank. It also eliminates the burden associated with substituting collateral, calculating mark-to-market values and adjusting collateral levels as market values fluctuate.

Terms and conditions with regard to using Bank-issued Letters of Credit for collateralizing deposits obtained through the PUD program include:

  • The LGIP requires that the term of the Letter of Credit must match the term of the certificate of deposit plus an additional two business days beyond the maturity date. For example, a 180-day CD will require a 182-day Letter of Credit.

  • The stated amount of the Letter of Credit must include both the principal amount of the CD plus expected accrued interest. For example, a 180-day CD in the amount of $1 million at a rate of one percent would require a 182-day Letter of Credit in the amount of $1.005 million.

  • Regardless of size, the Bank will charge a processing fee of 12.5 basis points on an actual/360-day basis for each Letter of Credit issued under the PUD Program.

  • Members' access to Letters of Credit are subject to our normal credit underwriting criteria.

To apply for a Letter of Credit please complete the LOC application (Word). Completed applications can be mailed or faxed to the Money Desk for processing.

Money Desk
Toll Free: 800.544.3452, ext. 1013
Local: 515.281.1013
Fax: 515.699.1250
Email: moneydesk@fhlbdm.com

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