Replacing letters of credit with surety

December 2, 2019 - Surety 101

Hi everybody, Chad Rosenberg, Rosenberg & Parker for the longest time bonds simply couldn’t compete with letters of credit. Why, because the banks giveaway LCs practically for free. That’s right, you heard me, I said free. They gave away as a lost leader for their good clients. Well that all start of the change in 2008 with the international banking crisis and something called the Basel III accord and these things required banks to start recognizing LCs on their balance sheets and against the ratios. So they have to start charging more money and as the bank rates went up bond rates were falling and suddenly bonds were competitive with letters of credit. There’s a couple of other reasons you may want to use bonds. One is LCs appear on your balance sheet as a liability whereas bonds do not and the other is the letters of credit go against your bank lines of credit where bonds do not. If you have any letters of credit that you think you may want to look at to replace with bonds, please contact us at Rosenberg & Parker our vision is clear and it’s pure surety.

Our vision is clear and it’s PURE surety