BATON ROUGE, LA – State lawmakers passed a bill during the Special Legislative Session to allow banks in Louisiana to use letters of credit issued by the Federal Home Loan Bank to collateralize deposits of state funds.

State Treasurer John Kennedy said the law gives Louisiana banks an additional financial instrument to use as collateral. A letter of credit is a legally binding document pledged to guarantee someones credit. Savings and loan institutions and many out-of-state banks can already pledge letters of credit as collateral.

This law levels the playing field among financial institutions, and it enables Louisiana banks to better compete, said Kennedy.

The new legislation, HB 105, which was authored by Rep. John Travis (D-Jackson), will mostly affect the banks collateral negotiations with the state and other public entities for their investment of public funds.

Kennedy said the state currently invests monies at competitive market community banks and national banks with offices located in Louisiana. The State Treasurer is authorized to keep funds on deposit with in-state financial institutions to foster economic stability and growth.

The new law will become effective upon the governors signature, or upon expiration of the time for bills to become law without signature by the governor.

Delia Taylor, Communications Director
(225) 342-0010