Interpretive Letter

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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  3. Can entities other than banks issue letters of credit?

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  4. What is a bank's legal liability when issuing a letter of credit?

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