Business and Personal Finance Dictionary

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• STANDBY LETTER OF CREDIT
  
  a guaranty issued by a Federal Home Loan Bank on behalf of a member thrift institution wishing to enter into an interest rate swap agreement on its own. If the member institution defaults on its swap contract, the standby letter of credit obligates the District Bank either to pay a stated amount to the counterparty or to assume the swap obligation of the member institution.
  
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