DEFINITION of 'Interpretive Letter'

A letter issued by banking regulators that interprets the banking law for a specific issue or party. Interpretive letters become effective immediately upon issuance. These letters are similar to IRS letter rulings that interpret the application of tax law. An example is the 1989 ruling that allowed banks to begin underwriting corporate bonds.

BREAKING DOWN 'Interpretive Letter'

Even though they don't technically have the force of law, banks pay close attention to interpretive letters for several reasons. They can illuminate new ways to market products and services, as well as provide approval for banks to increase their association with investment and insurance services.

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RELATED FAQS
  1. When is it necessary to get a letter of credit?

    Capitalize on assets and negate risks by using a letter of credit. Letters of credit are often requested for buying, selling ... Read Answer >>
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    Learn more about the different types of letters of credit that are used to facilitate exchanges between parties that might ... Read Answer >>
  3. Can entities other than banks issue letters of credit?

    Obtaining a letter of credit from a non-bank is legally acceptable according to the ICC, but companies tend to prefer to ... Read Answer >>
  4. When are you legally required to get a letter of credit?

    Learn how exporters or importers who deal in international trade use letters of credit to ensure that transactions are safe, ... Read Answer >>
  5. What is a bank's legal liability when issuing a letter of credit?

    Learn the responsibility of banks that issue letters of credit Letters of credits ensure payment on transactions between ... Read Answer >>
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