Independent undertakings issued by a national bank or Federal savings association to pay against documents.

CFR · 2024-01-01 · US · Title 12

(a) (b) (i) The independent character of the undertaking should be apparent from its terms (such as terms that subject it to laws or rules providing for its independent character); (ii) The undertaking should be limited in amount; (iii) The undertaking should: (A) Be limited in duration; or (B) Permit the national bank or Federal savings association to terminate the undertaking either on a periodic basis (consistent with the bank's or savings association's ability to make any necessary credit assessments) or at will upon either notice or payment to the beneficiary; or (C) Entitle the national bank or Federal savings association to cash collateral from the applicant on demand (with a right to accelerate the applicant's obligations, as appropriate); and (iv) The national bank or Federal savings association either should be fully collateralized or have a post-honor right of reimbursement from the applicant or from another issuer of an independent undertaking. Alternatively, if the national bank's or Federal savings association's undertaking is to purchase documents of title, securities, or other valuable documents, the bank or savings association should obtain a first priority right to realize on the documents if the bank or savings association is not otherwise to be reimbursed. (2) (i) In the event that the undertaking is to honor by delivery of an item of value other than money, the national bank or Federal savings association should ensure that market fluctuations that affect

official document · source cfr-2024 · id 12:§ 7.1016