Hello, I am seeking clarification on the accounting benefits received by banks who lend secured by a Financial Standby Letter of Credit. Specifically in addition to default mitigation, is the SBLC a leveragable asset on their books? Thank You.
How are Standby Letters of Credit accounted for from the beneficiary's perspective?
Answers
The bank receives funds when there is a default. Until then, there is no asset to leverage.
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Accounting