ARE BANK EVALUATIONS IMPORTANT FOR LETTERS OF CREDIT?
Be sure your bank has an investment grade or better rating from an acceptable rating company. Back in 1994 the Office of Management and Budget, in the Office of Federal Procurement Policy Letter 91-4, stated, “It is important to evaluate a bank’s credit worthiness before accepting a letter of credit issued by a bank, because letters of credit are not considered ‘deposits’ that are covered by federal deposit insurance. . .If a bank is sufficiently unhealthy as to fail, the beneficiary of a letter of credit will generally be regarded as a general creditor. A financial institution must receive an investment grade or better rating from any one of the companies listed in this policy letter (VERIBANC is one of the companies listed.) for it to be considered an acceptable issuer or confirmer of a letter of credit in which the U.S. Government is the beneficiary.” A VERIBANC risk rating of Green, Three Stars is recognized as an investment grade or better rating and is acceptable to the U.S. Gove
