Interpretive Letter

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Self-Regulatory Organization - ...

    A non-governmental organization that has the power to create ...
  2. Bank

    A financial institution licensed as a receiver of deposits. There ...
  3. Banking Department

    A state-specific regulatory body that oversees the operations ...
  4. Wealth Management

    A high-level professional service that combines financial/investment ...
  5. Structured Transaction

    A series of transactions that could have been treated as a single ...
  6. Portfolio Sale

    The sale of a large group of related financial assets in a single ...
RELATED FAQS
  1. What are some examples of general and administrative expenses?

    In accounting, general and administrative expenses represent the necessary costs to maintain a company's daily operations ... Read Full Answer >>
  2. How do dividend distributions affect additional paid in capital?

    Whether a dividend distribution has any effect on additional paid-in capital depends solely on what type of dividend is issued: ... Read Full Answer >>
  3. Why can additional paid in capital never have a negative balance?

    The additional paid-in capital figure on a company's balance sheet can never be negative because companies do not pay investors ... Read Full Answer >>
  4. When does the fixed charge coverage ratio suggest that a company should stop borrowing ...

    Since the fixed charge coverage ratio indicates the number of times a company is capable of making its fixed charge payments ... Read Full Answer >>
  5. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  6. How can I find net margin by looking a company's financial statements?

    In finance and accounting, financial statements represent the fundamental means of analyzing a company's financial position, ... Read Full Answer >>
Related Articles
  1. Personal Finance

    Texas Ratio Rounds Up Bank Failures

    This measure can help investors spot potential trouble in a bank's financials. Find out how.
  2. Personal Finance

    Using Economic Capital To Determine Risk

    Discover how banks and financial institutions use economic capital to enhance risk management.
  3. Economics

    Inside National Payment Systems

    Investopedia explains: The global interconnection of U.S. payment systems makes commerical and financial transfers possible.
  4. Insurance

    What Is The World Bank?

    You've heard of the World Bank, now find out how it functions and why some groups oppose it.
  5. Personal Finance

    What Are Central Banks?

    They print money, they control inflation, and much, much more. All you need to know about central banks is here.
  6. Fundamental Analysis

    Explaining the Common Size Income Statement

    A common size income statement expresses each account as a percentage of net sales.
  7. Professionals

    What Does an Auditor Do?

    An auditor ensures that organizations maintain accurate and honest financial records.
  8. Fundamental Analysis

    Calculating the Net Debt to EBITDA Ratio

    Financial analysts typically use the net debt to EBITDA ratio to determine a company’s ability to pay its debt.
  9. Economics

    How Does an Operating Lease Work?

    Operating lease is a term used mostly in accounting to denote a lease that gives the lessee rights to use and operate an asset without ownership.
  10. Economics

    Explaining the Liquidity Coverage Ratio

    The liquidity coverage ratio requires banks and other financial institutions to hold enough cash and liquid assets on hand to weather market stress.

You May Also Like

Hot Definitions
  1. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  2. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  3. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  4. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  5. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  6. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!