Some examples of Members’ Liabilities that are NOT
covered by the Deposit Insurance include, but are not limited to, the following:-
Letters of Credit
Letters of Credit are credit instruments issued by a bank guaranteeing payments
on behalf of its customers to a BENEFICIARY, normally to a third party but
sometimes to the bank’s customer, for a stated period of time and when
certain conditions are met.
Standby letter of Credit
A Standby letter of Credit is a contingent (future) obligation of the issuing
bank to make payment to the designated beneficiary if the bank’s customer
fails to perform as called for under the terms of a contract. Standby letters,
for this reason, are considered OFF-BALANCE SHEET LIABILITIES.
Inter-bank deposits are deposits held in a commercial bank by another commercial
Affiliate Company Deposits
Affiliate company deposits are deposits held in a holding, subsidiary or co-subsidiary
Foreign Currency Deposits
Foreign currency deposits are deposits held in an
institution which are denominated and payable in a foreign currency.
A Mutual Fund is an investment scheme which pools money from its shareholders
in stocks, bonds, government securities, and short-term money market instruments.
Short-term IOU, or unsecured money market obligation, issued by prime rated
commercial firms and financial companies.
Commercial paper is, in effect, a promissory note of the issuer used to finance
current obligations, and is a NEGOTIABLE INSTRUMENT.
A banker’s acceptance is a time draft or bill of exchange drawn on a
bank and accepted by that bank. The draft is stamped “accepted’ and
signed by a bank officer.
By accepting the draft, the bank agrees to pay the face value of the obligation
if the issuer (the DRAWER of the draft) fails to pay.
Obligations using Asset-Backed
Asset-backed securities are bonds or debt securities collateralized by the
cash flow from a pool of auto loans, credit card receivables, vehicle and
equipment leases, consumer loans and bonds.
The bonds give the holder an UNDIVIDED INTEREST in the securitized assets,
and are funded by the cash flows received by the issuer from regular payments
of principal and interest from borrowers.