What exactly are bank credit instruments?
Bank credit instruments are conditional bank obligations, similar to a check cashable under certain circumstances, issuer credit worthiness being the criteria. In these instances, they are general obligations of the issuing institution, without reserves for repayment being set aside. Stipulation is not as direct liability in the balance sheet but in the Notes to the financial statement a contingent liabilities. While not secured obligations, the implications would be quite serious for the banking industry if a major institution defaulted on any payment due, secured or unsecured.
