Collateralization Requirements for Public Deposits State Issues Brief

Transcription

1 Collateralization Requirements for Public Deposits State Issues Brief Collateralization of public deposits by pledging securities or other instruments (e.g., surety bonds or letters of credit) is a method of safeguarding the deposits. Half of the states (25) have laws that expressly permit credit unions to accept public funds AND permit government entities to deposit public funds in credit unions: Arizona, California, Connecticut, Hawaii, Idaho, Illinois, Indiana, Iowa, Louisiana, Maine, Michigan, Minnesota, Missouri, Montana, Nevada, New Jersey, New Mexico, Oklahoma, Oregon, Pennsylvania, Rhode Island, Texas, Utah, Washington and Wisconsin. (See State Issues Brief on Public Deposits) Of those 25 states, the following fifteen (15) states have collateralizations requirements for public deposits: Arizona, California, Connecticut, Hawaii, Iowa, Illinois, Indiana, Louisiana, Michigan, Minnesota, Montana, Nevada, North Dakota, Oklahoma and Texas. Arizona Eligible depositories; collateral. A. Any eligible depository that receives an investment or any deposit of treasury monies in excess of the amount insured by an instrumentality of the United States shall collateralize those deposits with any of the following: 1. Securities listed in section , subsection A, paragraphs 1 and State treasurer's warrant notes. 3. The safekeeping receipt of a federal reserve bank or any bank located in a reserve city, or any bank authorized to do business in this state, whose combined capital, surplus and outstanding capital notes and debentures on the date of the safekeeping receipt are one hundred million dollars or more, evidencing the deposit therein of any securities or instruments described in this section. A safekeeping receipt shall not qualify as security, if issued by a bank to secure its own public deposits, unless issued directly through its trust department. The safekeeping receipt shall show upon its face that it is issued for the account of the state treasurer and shall be delivered to the state treasurer. 4. Letters of credit issued by a federal home loan bank if: (a) The letter of credit has been delivered pursuant to this section or chapter 10, article 1 of this title to the statewide collateral pool administrator. (b) The letter of credit meets the required conditions of: (i) Being irrevocable. (ii) Being issued, presentable and payable at a federal home loan bank in United States dollars. Presentation may be made by the beneficiary submitting the original letter of credit, including any amendments, and the demand in writing, by overnight delivery. (iii) If the letter of credit is for purposes of chapter 10, article 1 of this title, containing a statement that identifies the statewide collateral pool administrator as the beneficiary. 1

2 (iv) Containing an issue date and a date of expiration. (c) For the purposes of chapter 10, article 1 of this title, the eligible depository, if notified by the statewide collateral pool administrator, is not allowed to use new letters of credit issued by a federal home loan bank if that federal home loan bank fails to pay a draw request as provided for in the letters of credit or fails to properly complete a confirmation of the letters of credit. B. The securities, warrants or safekeeping receipt for those items shall be accepted at market value equal to one hundred two per cent of the deposit liability to the state treasurer, and, if at any time their market value becomes less than one hundred two per cent of the deposit liability to the state treasurer, additional items required to guarantee deposits shall be deposited immediately with the state treasurer by the eligible depository. When items pledged as collateral mature or are called for redemption, the cash received for the item shall be held in place of the items until the eligible depository has obtained a written release or provided substitute securities, instruments or warrants. C. The deposit of securities, warrants or a safekeeping receipt must be such that the eligible depository will promptly pay to the state treasurer monies in its custody, upon lawful demand, and will, when required by law, pay the monies to the state treasurer. D. The securities, warrants or safekeeping receipt of an eligible depository shall be deposited with the state treasurer, and the state treasurer is the custodian of those items. The state treasurer may then deposit with the eligible depository monies then in his possession in accordance with this article. E. Eligible depositories shall report to the state treasurer monthly and upon demand the par and market value of any pledged collateral and the total deposits of the state treasurer. California Notwithstanding Section or any other provision of this code, a local agency that has the authority under law to invest funds may, at its discretion, invest a portion of its surplus funds in certificates of deposit at a commercial bank, savings bank, savings and loan association, or credit union that uses a private sector entity that assists in the placement of certificates of deposit, provided that the purchases of certificates of deposit pursuant to this section, Section , and subdivision (i) of Section do not, in total, exceed 30 percent of the agency's funds that may be invested for this purpose. The following conditions shall apply: (a) The local agency shall choose a nationally or state-chartered commercial bank, savings bank, savings and loan association, or credit union in this state to invest the funds, which shall be known as the "selected" depository institution. (b) The selected depository institution may submit the funds to a private sector entity that assists in the placement of certificates of deposit with one or more commercial banks, savings banks, savings and loan associations, or credit unions that are located in the United States for the local agency's account. (c) The full amount of the principal and the interest that may be accrued during the maximum term of each certificate of deposit shall at all times be insured by the Federal Deposit Insurance Corporation or the National Credit Union Administration. (d) The selected depository institution shall serve as a custodian for each certificate of deposit that is issued with the placement service for the local agency's account. (e) At the same time the local agency's funds are deposited and the certificates of deposit are issued, the selected depository institution shall receive an amount of deposits from other commercial banks, savings banks, savings and loan associations, or credit unions that, in total, are equal to, or greater than, the full amount of the principal that the local agency initially deposited through the selected depository institution for investment. 2

3 (f) Notwithstanding subdivisions (a) to (e), inclusive, no credit union may act as a selected depository institution under this section or Section unless both of the following conditions are satisfied: (1) The credit union offers federal depository insurance through the National Credit Union Administration. (2) The credit union is in possession of written guidance or other written communication from the National Credit Union Administration authorizing participation of federally insured credit unions in one or more certificate of deposit placement services and affirming that the moneys held by those credit unions while participating in a deposit placement service will at all times be insured by the federal government. (g) It is the intent of the Legislature that this section shall not restrict competition among private sector entities that provide placement services pursuant to this section. (h) This section shall become operative on January 1, Connecticut Sec. 36a Risk-based capital ratio. (a) In the case of a bank or an out-of-state bank that maintains in this state a branch as defined in section 36a-410 of the Connecticut General Statutes, riskbased capital ratio shall be determined in accordance with applicable federal regulations concerning qualifying risk-based capital ratio or riskbased capital ratio as the case may be. For purposes of this subsection, federal regulations means capital guidelines adopted by the Federal Deposit Insurance Corporation, 12 C.F.R. Part 325, Appendix A; the Office of the Comptroller of the Currency, 12 C.F.R. Part 3, Appendix A; the Board of Governors of the Federal Reserve System, 12 C.F.R. Part 208, Appendix A; or the Office of Thrift Supervision, 12 C.F.R. Part 567, as from time to time amended. (b) In the case of a Connecticut credit union and a federal credit union, riskbased capital ratio means net worth divided by total assets. Sec. 36a Public deposits held by the depository. The amount of public deposits held for purposes of Section 36a-333 (a) of the Connecticut General Statutes, where either (a) public deposits reported on the most recent call report equals zero or (b) the average of the public deposits reported on the four most recent quarterly call reports equals zero, shall be the actual amount on deposit. Sec. 36a-337. Securing of public deposits. (a) All qualified public depositories shall have power to secure public deposits in accordance with sections 36a-330 to 36a-338, inclusive. Except as provided in said sections, no bond or other security shall be required of or given by any qualified public depository for any public deposit. (b) In lieu of eligible collateral required under section 36a-333, at least to the extent provided by said section, not more than fifty per cent of the public deposits held by any qualified public depository may be secured solely by a private insurance policy purchased by the depository, the depositor, or any other third party. Any private insurance policy used to secure public deposits shall be issued by an insurance company licensed to do business in Connecticut. (c) In lieu of eligible collateral required under section 36a-333, public deposits held by any qualified public depository may be secured solely by an irrevocable letter of credit issued by the Federal Home Loan Bank of Boston, provided such federal home loan bank has a rating of the highest rating level from 3

4 a rating service recognized by the commissioner and provided further the amount of the letter of credit, as a percentage of the public deposits, is no less than the amount required by section 36a-333 for eligible collateral for the particular depository. Hawaii 38-2 Authorized; conditions. (a) All moneys in the state treasury may be deposited by the director to the credit of the State in any depository which the director, with the approval of the governor, may select, pursuant to this section, and any sums so deposited shall be deemed to be in the state treasury; provided that the depository in which the money is deposited furnish security as hereinafter provided. In selecting a depository the class of security offered shall be considered as the basis of selection and due regard shall be given to a depository doing business in the State. (b) No more than forty per cent of the aggregate amount of moneys of the State available for deposit and on deposit in the state treasury may be deposited in depositories without the State. (c) No more than sixty per cent of the aggregate amount of moneys of the State available for deposit and on deposit in the state treasury may be deposited in any one depository; provided that if the yield offered by any one depository in the State is greater than the yield offered by other depositories in the State, then, consistent with the safety and liquidity of such moneys, more than sixty per cent of the aggregate amount of moneys available for deposit and on deposit in the stated treasury may be deposited in such depository within the State offering a higher yield. (d) The director shall consider the beneficial effects to the State of using depositories within the State, as well as the safety and liquidity of the sums to be deposited in the depository and the yield offered by the depository prior to the selection of the depository. (e) In case of loan fund money for which there is no immediate need, or expenditures from which would not be made for at least three months, the director may place these funds on time deposit on such terms and at such rates of interest as may be allowed by a depository to other depositors. (f) All deposits of money, except time deposits, shall be paid upon demand on checks signed by the director and countersigned by the comptroller, or by the payment of a certificate of deposit issued by the depository, which certificate shall be endorsed by the payee named therein, as well as by the comptroller, or by preauthorized automatic transfer of funds between transaction accounts held within the same depository. Transaction accounts, as defined in Regulation D of the Federal Reserve System, as authorized by Section 19 (12 U.S.C. 461 et seq.) of the Federal Reserve Act, includes all checking accounts, both demand and interest bearing. Each depository shall at the end of every month render to the director a statement, in duplicate, for each of the funds of the State, showing the daily balances on open commercial account which were held by it during the month. The duly authorized representatives of any depository shall at all times during office hours have access to the securities deposited by the depository to secure the deposits of the State for the purpose of examining the same and removing the coupons that may have matured, the examination to be made in the presence of the director or the director's representative. Iowa 12C.15 RESTRICTION ON REQUIRING COLLATERAL. A local government shall not require a pledge of collateral for that portion of the local government's deposits in a credit union that is covered by insurance of a federal agency or instrumentality. 4

5 12C.16 SECURITY FOR DEPOSIT OF PUBLIC FUNDS. 1. Before a deposit of public funds is made by a public officer with a credit union in excess of the amount federally insured, the public officer shall obtain security for the deposit by one or more of the following: a. The credit union may give to the public officer a corporate surety bond of a surety corporation approved by the treasury department of the United States and authorized to do business in this state, which bond shall be in an amount equal to the public funds on deposit at any time. The bond shall be conditioned that the deposit shall be paid promptly on the order of the public officer making the deposit and shall be approved by the officer making the deposit. b. (1) The credit union may deposit, maintain, pledge and assign for the benefit of the public officer in the manner provided in this chapter, securities approved by the public officer, the market value of which is not less than one hundred ten percent of the total deposits of public funds placed by that public officer in the credit union. The securities shall consist of any of the following: (a) Direct obligations of, or obligations that are insured or fully guaranteed as to principal and interest by, the United States of America or an agency or instrumentality of the United States of America. (b) Public bonds or obligations of this state or a political subdivision of this state. (c) Public bonds or obligations of another state or a political subdivision of another state whose bonds are rated within the two highest classifications of prime as established by at least one of the standard rating services approved by the superintendent of banking pursuant to chapter 17A. (d) To the extent of the guarantee, loans, obligations, or nontransferable letters of credit upon which the payment of principal and interest is fully secured or guaranteed by the United States of America or an agency or instrumentality of the United States of America or the United States central credit union, a corporate central credit union organized under section , or a corporate credit union whose activities are subject to regulation by the national credit union administration, and the rating of any one of such credit unions remains within the two highest classifications of prime established by at least one of the standard rating services approved by the superintendent of banking by rule pursuant to chapter 17A. The treasurer of state shall adopt rules pursuant to chapter 17A to implement this section. (e) First lien mortgages which are valued according to practices acceptable to the treasurer of state. (f) Investments in an open-end management investment company registered with the federal securities and exchange commission under the federal Investment Company Act of 1940, 15 U.S.C. 80a, which isoperated in accordance with 17 C.F.R a-7. (2) Direct obligations of, or obligations that are insured or fully guaranteed as to principal and interest by, the United States of America, which may be used to secure the deposit of public funds under subparagraph (1), subparagraph division (a), include investments in an investment company or investment trust registered under the federal Investment Company Act of 1940, 15 U.S.C. 80a, the portfolio of which is limited to the United States government obligations described in subparagraph (1), subparagraph division (a), and to repurchase agreements fully collateralized by the United States government obligations described in subparagraph (1), subparagraph division (a), if the investment company or investment trust takes delivery of the collateral either directly or through an authorized custodian. 2. If public funds are secured by both the assets of a credit union and a bond of a surety company, the assets and bond shall be held as security for a rateable proportion of the deposit on the basis of the market value of the assets and of the total amount of the surety bonds. 5

6 Illinois (15 ILCS 520/11) (from Ch. 130, par. 30). Sec. 11. Protection of public deposits; eligible collateral. (a) For deposits not insured by an agency of the federal government, the State Treasurer, in his or her discretion, may accept as collateral any of the following classes of securities, provided there has been no default in the payment of principal or interest thereon: (1) Bonds, notes, or other securities constituting direct and general obligations of the United States, the bonds, notes, or other securities constituting the direct and general obligation of any agency or instrumentality of the United States, the interest and principal of which is unconditionally guaranteed by the United States, and bonds, notes, or other securities or evidence of indebtedness constituting the obligation of a U.S. agency or instrumentality. (2) Direct and general obligation bonds of the State of Illinois or of any other state of the United States. (3) Revenue bonds of this State or any authority,board, commission, or similar agency thereof. (4) Direct and general obligation bonds of any city, town, county, school district, or other taxing body of any state, the debt service of which is payable from general ad valorem taxes. (5) Revenue bonds of any city, town, county, or school district of the State of Illinois. (6) Obligations issued, assumed, or guaranteed by the International Finance Corporation, the principal of which is not amortized during the life of the obligation, but no such obligation shall be accepted at more than 90% of its market value. (7) Illinois Affordable Housing Program Trust Fund Bonds or Notes as defined in and issued pursuant to the Illinois Housing Development Act. (8) In an amount equal to at least market value of that amount of funds deposited exceeding the insurance limitation provided by the Federal Deposit Insurance Corporation or the National Credit Union Administration or other approved share insurer: (i) securities, (ii) mortgages, (iii) letters of credit issued by a Federal Home Loan Bank, or (iv) loans covered by a State Guarantee under the Illinois Farm Development Act, if that guarantee has been assumed by the Illinois Finance Authority under Section of the Illinois Finance Authority Act, and loans covered by a State Guarantee under Article 830 of the Illinois Finance Authority Act. (b) The State Treasurer may establish a system to aggregate permissible securities received as collateral from financial institutions in a collateral pool to secure State deposits of the institutions that have pledged securities to the pool. (c) The Treasurer may at any time declare any particular security ineligible to qualify as collateral when, in the Treasurer's judgment, it is deemed desirable to do so. (d) Notwithstanding any other provision of this Section, as security the State Treasurer may, in his discretion, accept a bond, executed by a company authorized to transact the kinds of business described in clause (g) of Section 4 of the Illinois Insurance Code, in an amount not less than the amount of the deposits required by this Section to be secured, payable to the State Treasurer for the benefit of the People of the State of Illinois, in a form that is acceptable to the State Treasurer. (Source: P.A , eff ) (15 ILCS 520/11.1) (from Ch. 130, par. 30.1). Sec The State Treasurer may, in his or her discretion, accept as security for State deposits insured certificates of deposit or share certificates issued to the depository institution pledging them as security and may require security in the amount of 125% of the value of the State deposit. Such certificate of deposit or share certificate shall: 6

7 (1) be fully insured by the Federal Deposit Insurance Corporation, the Federal Savings and Loan Insurance Corporation or the National Credit Union Share Insurance Fund or issued by a depository institution which is rated within the 3 highest classifications established by at least one of the 2 standard rating services; (2) be issued by a financial institution having assets of $15,000,000 or more; and (3) be issued by either a savings and loan association having a capital to asset ratio of at least 2%, by a bank having a capital to asset ratio of at least 6% or by a credit union having a capital to asset ratio of at least 4%. The depository institution shall effect the assignment of the certificate of deposit or share certificate to the State Treasurer and shall agree, that in the event the issuer of the certificate fails to maintain the capital to asset ratio required by this Section, such certificate of deposit or share certificate shall be replaced by additional suitable security. Indiana IIC Creation; purpose; public deposit insurance fund; tax exemption. Sec. 1. (a) There is created an independent body politic and corporate, constituting an instrumentality of the state for the public purposes set out in this chapter, to be known as the board for depositories. The board is separate from the state in its corporate and sovereign capacity. The purpose of the board is to insure the safekeeping and prompt payment of all public funds deposited in any depository, to the extent they are not covered by insurance of any federal deposit insurance agency, by maintaining and operating in its own name the public deposit insurance fund under this chapter.(b) Every depository that has public funds shall pay into the public deposit insurance fund the assessments provided in this chapter and comply with all lawful requirements of the board for depositories. The public deposit insurance fund shall be maintained by the assessments payable by the depositories and by the collection of all claims created under IC and by the receipt of all interest and other earnings of the insurance fund from any source.(c) All property in the public deposit insurance fund, the interest or income derived from it or through its use, and all property otherwise held by the board for depositories under this chapter is exempt from all taxes imposed by the state or any political subdivision (See IIC et seq. Also Louisiana Investments by political subdivisions. A.(1) All municipalities, parishes, school boards, and any other political subdivisions of the state are hereby authorized and directed to invest such monies in any general fund or special fund of the political subdivision, and any other funds under the control of the political subdivision which they, in their discretion, may determine to be available for investment in any of the following obligations: (f) Funds invested in accordance with the provisions of R.S. 33:2955(A)(1)(d) shall not exceed at any time the amount insured by the Federal Deposit Insurance Corporation in any one banking institution, or in any one savings and loan association, or National Credit Union Administration, unless the uninsured portion is collateralized by the pledge of securities in the manner provided in R.S. 39:

8 Michigan Security for deposit prohibited. Sec. 2. Security in the form of collateral, surety bonds, or another form shall not be taken for the deposit of the public funds. Minnesota 118A.03 WHEN AND WHAT COLLATERAL REQUIRED. Subdivision 1.For deposits beyond insurance. To the extent that funds on deposit at the close of the financial institution's banking day exceed available federal deposit insurance, the government entity shall require the financial institution to furnish collateral security or a corporate surety bond executed by a company authorized to do business in the state. For the purposes of this section, "banking day" has the meaning given in Federal Reserve Board Regulation CC, Code of Federal Regulations, title 12, section 229.2(f), and incorporates a financial institution's cutoff hour established under section Subd. 2.In lieu of surety bond. The following are the allowable forms of collateral in lieu of a corporate surety bond: (1) United States government Treasury bills, Treasury notes, Treasury bonds; (2) issues of United States government agencies and instrumentalities as quoted by a recognized industry quotation service available to the government entity; (3) general obligation securities of any state or local government with taxing powers which is rated "A" or better by a national bond rating service, or revenue obligation securities of any state or local government with taxing powers which is rated "AA" or better by a national bond rating service; (4) general obligation securities of a local government with taxing powers may be pledged as collateral against funds deposited by that same local government entity; (5) irrevocable standby letters of credit issued by Federal Home Loan Banks to a municipality accompanied by written evidence that the bank's public debt is rated "AA" or better by Moody's Investors Service, Inc., or Standard & Poor's Corporation; and (6) time deposits that are fully insured by any federal agency. Subd. 3.Amount. The total amount of the collateral computed at its market value shall be at least ten percent more than the amount on deposit at the close of the financial institution's banking day, except that where the collateral is irrevocable standby letters of credit issued by Federal Home Loan Banks, the amount of collateral shall be at least equal to the amount on deposit at the close of the financial institution's banking day. The financial institution may furnish both a surety bond and collateral aggregating the required amount. Subd. 4.Assignment. Any collateral pledged shall be accompanied by a written assignment to the government entity from the financial institution. The written assignment shall recite that, upon default, the financial institution shall 8

9 release to the government entity on demand, free of exchange or any other charges, the collateral pledged. Interest earned on assigned collateral will be remitted to the financial institution so long as it is not in default. The government entity may sell the collateral to recover the amount due. Any surplus from the sale of the collateral shall be payable to the financial institution, its assigns, or both. Subd. 5.Withdrawal of excess collateral. A financial institution may withdraw excess collateral or substitute other collateral after giving written notice to the government entity and receiving confirmation. The authority to return any delivered and assigned collateral rests with the government entity. Subd. 6.Default. For purposes of this section, default on the part of the financial institution includes, but is not limited to, failure to make interest payments when due, failure to promptly deliver upon demand all money on deposit, less any early withdrawal penalty that may be required in connection with the withdrawal of a time deposit, or closure of the depository. If a financial institution closes, all deposits shall be immediately due and payable. It shall not be a default under this subdivision to require prior notice of withdrawal if such notice is required as a condition of withdrawal by applicable federal law or regulation. Subd. 7.Safekeeping. All collateral shall be placed in safekeeping in a restricted account at a Federal Reserve bank, or in an account at a trust department of a commercial bank or other financial institution that is not owned or controlled by the financial institution furnishing the collateral. The selection shall be approved by the government entity. Montana Insurance on deposits. (1) Deposits in excess of the amount insured by the federal deposit insurance corporation or the national credit union administration may not be made unless the bank, building and loan association, savings and loan association, or credit union first delivers to the state treasurer or deposits in trust with some solvent bank, as security therefor, bonds or other obligations of the kinds listed in , having a market value equal to at least 50% of the amount of the deposits in excess of the amount insured. The board of investments may require security of a greater value. When negotiable securities are placed in trust, the trustee's receipt may be accepted instead of the actual securities if the receipt is in favor of the state treasurer, successors in office, and the state of Montana and the form of receipt and the trustee have been approved by the board of investments. (2) Any bank, building and loan association, savings and loan association, or credit union pledging securities as provided in this section may at any time substitute securities for any part of the securities pledged. The substituted collateral must conform to and have a market value at least sufficient for compliance with subsection (1). If the substituted securities are held in trust, the trustee shall, on the same day the substitution is made, forward by registered or certified mail to the state treasurer and to the depository financial institution a receipt specifically describing and identifying both the securities substituted and those released and returned to the depository financial institution. 9

10 Security for deposits of public funds. The following kinds of securities may be pledged or guarantees may be issued to secure deposits of public funds: (1) direct obligations of the United States; (2) securities as to which the payment of principal and interest is guaranteed by the United States; (3) securities issued or fully guaranteed by the following agencies of the United States or their successors, whether or not guaranteed by the United States: (a) commodity credit corporation; (b) federal intermediate credit banks; (c) federal land bank; (d) bank for cooperatives; (e) federal home loan banks, including a letter of credit from a federal home loan bank; (f) federal national mortgage association; (g) government national mortgage association; (h) small business administration; (i) federal housing administration; and (j) federal home loan mortgage corporation; (4) securities of or other interests in an open-end or closed-end management type investment company or investment trust registered under the Investment Company Act of 1940 (15 U.S.C. 80a-1 through 80a-64), as amended, if: (a) the portfolio of the investment company or investment trust is limited to United States government obligations and repurchase agreements fully collateralized by United States government obligations; and (b) the investment company or investment trust takes delivery of the collateral for any repurchase agreement, either directly or through an authorized custodian; (5) general obligation bonds of the state or of any county, city, school district, or other political subdivision of the state; (6) revenue bonds of any county, city, or other political subdivision of the state, when backed by the full faith and credit of the subdivision or when the revenue pledged to the payment of the bonds is derived from a water or sewer system and the issuer has covenanted to establish and maintain rates and charges for the system in an amount sufficient to produce revenue equal to at least 125% of the average annual principal and interest due on all bonds payable from the revenue during the outstanding term of the bonds; (7) interest-bearing warrants of the state or of any county, city, school district, or other political subdivision of the state issued in evidence of claims in an amount that, with all other claims on the same fund, does not exceed the amount validly appropriated in the current budget for expenditure from the fund in the year in which they are issued; (8) obligations of housing authorities of the state secured by a pledge of annual contributions or by a loan agreement made by the United States or any agency of the United States providing for contributions or a loan sufficient with other funds pledged to pay the principal of and interest on the obligations when due. The bonds and other obligations made eligible for investment in and (1)(a) may be used as security for all deposits of public funds or obligations for which depository bonds or any kind of bonds or other securities are required or may by law be deposited as security. (9) general obligation bonds of other states and of municipalities, counties, and school districts of other states; 10

11 (10) undertaking or guarantees issued by a surety company authorized to do business in the state; (11) first mortgages and trust indentures on real property. The depository shall, on a quarterly basis, certify to the state treasurer that sufficient first mortgages and trust indentures on real property are available and segregated to secure deposits of public funds. The board of investments shall determine the amount of security required. (12) bonds issued pursuant to Title 7, chapter 12, parts 21, 41, and 42; (13) bonds issued pursuant to Title 90, chapter 6, part 1; (14) revenue bonds issued by any unit of the university system of the state of Montana; and (15) advance refunded bonds secured by direct obligations of the United States treasury held in irrevocable escrow. Nevada NRS Collateral for uninsured deposits. 1. All money deposited by the State Treasurer which is not within the limits of insurance provided by an instrumentality of the United States must be secured by collateral composed of the following types of securities: (a) United States treasury notes, bills, bonds or obligations as to which the full faith and credit of the United States are pledged for the payment of principal and interest, including the guaranteed portions of Small Business Administration loans if the full faith and credit of the United States is pledged for the payment of the principal and interest; (b) Bonds of this state; (c) Bonds of any county, municipality or school district within this state; (d) Promissory notes secured by first mortgages or first deeds of trust which meet the requirements of NRS ; (e) Mortgage-backed pass-through securities guaranteed by the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation or the Government National Mortgage Association; (f) Collateralized mortgage obligations or real estate mortgage investment conduits that are rated AAA, Aaa or its equivalent by a nationally recognized rating service; (g) Instruments in which the State is permitted by NRS to invest; or (h) Irrevocable letters of credit from any Federal Home Loan Bank with the State Treasurer named as the beneficiary. 2. Collateral deposited by the depository bank, credit union or savings and loan association must be pledged with the State Treasurer or with any Federal Home Loan Bank, any bank or any insured credit union or savings and loan association, other than the depository bank, credit union or savings and loan association, which will accept the securities in trust for the purposes of this section. 3. The fair market value of the deposit of securities as collateral by each depository bank, credit union or savings and loan association must be at least the amount required pursuant to NRS to , inclusive. The fair market value of any collateral consisting of promissory notes with first mortgages or first deeds of trust shall be deemed to be 75 percent of the unpaid principal of the notes. 4. All securities to be used as such collateral are subject to review by the State Treasurer. The depository bank, credit union or savings and loan association shall submit reports to the State Treasurer as required pursuant to NRS to , inclusive. 11

12 5. The State Treasurer may, from time to time, require the deposit of additional securities as collateral if, in his or her judgment, the additional securities are necessary to secure the State Treasurer s deposit. North Dakota Bond of depository - Approval or disapproval - Term. Except as is otherwise provided in sections and , and before any deposit is made in any depository other than the Bank of North Dakota, by or in behalf of any public corporation, such depository shall furnish a bond payable to the public corporation making such deposit in an amount that at least equals the largest deposit that at any time may be in such depository. Such bond must be approved as to form by the state's attorney and as to amount and sufficiency by the board. If the board fails or refuses to approve any such bond, the same may be presented to the judge of the district court, upon three days' notice to the clerk of the public corporation to which such bond was submitted, and the judge shall proceed forthwith to hear and determine the sufficiency of such bond and may approve or disapprove the same as the facts warrant. If the judge approves such bond, the said financial institution must be declared a depository of the funds of such public corporation. The sureties on all bonds required by public corporations according to the provisions of this chapter shall justify as required by chapter In lieu of such personal bond, the governing board of the public corporation involved may require the financial institution designated as a depository to file a surety bond for a sum equal to the amount of funds such financial institution may receive according to the provisions of this chapter. Such bond, when approved, must be deposited with the county auditor. Such bond must be a continuing bond and must be binding until the proper board of the public corporation shall require a new or different bond, but in no case involving the deposit of funds of public corporations may such bond be continued without a renewal thereof for a longer period than four years. Oklahoma State Treasurer - Selection of depositories - Out-of-state depositories - Relationship with financial institutions - Limitations on deposits - Reports. A. The State Treasurer is authorized and directed to select a number of banks, savings banks or savings and loan associations and credit unions within the State of Oklahoma as depositories for all monies and funds coming into the hands of the State Treasurer as the official depository. Such banks, savings banks or savings and loan associations and credit unions shall be in good standing and conducting a regular banking business and shall collect such drafts, bills of exchange, and checks as may be deposited by the state in the regular course of business, and shall pay all checks and drafts legally authorized and duly drawn on the funds deposited in such banks, savings banks or savings and loan associations and credit unions. B. At the request of state agencies or state institutions conducting operations or transacting state business outside the State of Oklahoma, the State Treasurer is hereby authorized to name and designate financial institutions located without the State of Oklahoma as official depositories of state monies and funds where it is shown to the satisfaction of the State Treasurer that the need for such out-of-state depository is required for the orderly and expeditious deposit of monies and funds coming into the possession of the requesting state agency or state institution. For purposes of this section, the State Treasurer shall not designate any financial institution outside the United States for the deposit of public funds, monies, securities, or any other financial assets subject to the control of the State Treasurer. Any out-of-state financial institution designated as an official depository of the State Treasurer shall have a 12

13 service agent in the State of Oklahoma so that service of summons or legal notice may be had on such designated agent as is now or may hereafter be provided by law. Before designating any financial institution outside the State of Oklahoma as an official depository, the State Treasurer shall, if the State Treasurer deems it necessary, require a bond to be given by such financial institution to the State of Oklahoma in double the amount of monies which the requesting state agency or institution anticipates will be the maximum amount of money or funds on deposit at any one time with the financial institution. Such bond will be approved by the State Treasurer and filed with the Secretary of State. Any out-of-state financial institution designated as an official depository shall in all respects conform to and comply with the provisions of this section, the Security for Public Deposits Act, and any and all laws pertaining to financial institutions receiving deposits of public monies or funds. C. The State Treasurer shall establish procedures which provide minimum standards for establishing and maintaining relationships between state entities and financial institutions. As used in this subsection, financial institutions means those institutions described in subsection E of this section, companies that provide alternative direct deposit services known as payroll card or paycard, credit card processing companies and other companies which handle or process financial transactions. Any agreements between state agencies and financial institutions, as defined in this subsection, shall be subject to prior approval by the State Treasurer. If the State Treasurer has an agreement with a financial institution to provide services to the State Treasurer, a state agency may pay the institution directly for services performed for the agency under the same terms, if the services are services not previously provided to the agency through the State Treasurer. State agencies may enter into agreements with the State Treasurer to participate in any agreements entered into by the State Treasurer with financial institutions or companies which handle or process financial transactions as described in this subsection. Any state agency participating in such an agreement may pay the vendor directly for any fees owed on transactions associated with that agency. The State Treasurer is authorized to prescribe formats and issue all state vouchers, warrants and checks drawn on state treasury funds. The State Treasurer may compensate financial institutions for services rendered to the state by direct fee charges or through compensating balances. Any financial institution receiving payment for services from the state through compensating balances shall file a report quarterly with the State Treasurer detailing the services rendered to the state and the charges for such services. Such charges shall not exceed those made for similar services to other customers of the financial institution. If the quarterly value of the compensating balance arrangement is above or below the quarterly charges for the services rendered to the state had service charges been separately billed, the difference in amount of the quarterly charges for the services rendered and the amount of the compensating balance shall be applied to the subsequent quarter. Any compensation arrangements made with financial institutions pursuant to this subsection shall not be subject to the provisions of The Oklahoma Central Purchasing Act. D. Of the public funds in the hands of the State Treasurer, there shall not be deposited in any one of such banks, savings banks or savings and loan associations and credit unions an amount to exceed the combined amount of insured deposits plus approved legal securities pledged by such banks, savings banks or savings and loan associations and credit unions therefor. Such banks, savings banks or savings and loan associations and credit unions shall make quarterly reports of the amount deposited, checked out, or withdrawn and the balances on hand for the fiscal year. E. All provisions of this title relating to depositories for public funds shall include, in addition to banks, all financial institutions of this state. As used in this subsection, the term financial institutions means banks, savings banks, savings and loan associations and credit unions in this state whose deposits are insured by the Federal Deposit Insurance Corporation, the National Credit Union Administration or any successor institutions. 13

14 F. The State Treasurer may permit treasurers of local governmental entities to place public funds under their control into investments used by the State Treasurer for state funds, if the local treasurer has appropriate investment authority. Texas SUBCHAPTER B. DEPOSITORY; SECURITY FOR DEPOSIT OF PUBLIC FUNDS Sec COLLATERAL REQUIRED. A deposit of public funds shall be secured by eligible security to the extent and in the manner required by this chapter. Sec AMOUNT OF COLLATERAL. (a) Except as provided by Subsection (b), the total value of eligible security to secure a deposit of public funds must be in an amount not less than the amount of the deposit of public funds: (1) increased by the amount of any accrued interest; and (2) reduced to the extent that the United States or an instrumentality of the United States insures the deposit. (b) The total value of eligible security described by Section (4)(D), Education Code, to secure a deposit of public funds of a school district must be in an amount not less than 110 percent of the amount of the deposit as determined under Subsection (a). The total market value of the eligible security must be reported at least once each month to the school district. (c) The value of a surety bond is its face value. (d) The value of an investment security is its market value. Sec COLLATERAL POLICY. (a) In accordance with a written policy approved by the governing body of the public entity, a public entity shall determine if an investment security is eligible to secure deposits of public funds. (b) The written policy may include: (1) the security of the institution that obtains or holds an investment security; (2) the substitution or release of an investment security; and (3) the method by which an investment security used to secure a deposit of public funds is valued. Sec CONTRACT FOR SECURING DEPOSIT OF PUBLIC FUNDS. (a) A public entity may contract with a bank that has its main office or a branch office in this state to secure a deposit of public funds. (b) The contract may contain a term or condition relating to an investment security used as security for a deposit of public funds, including a term or condition relating to the: (1) possession of the collateral; (2) substitution or release of an investment security; (3) ownership of the investment securities of the bank used to secure a deposit of public funds; and (4) method by which an investment security used to secure a deposit of public funds is valued. 14

15 Sec RECORDS OF DEPOSITORY. (a) A public entity's depository shall maintain a separate, accurate, and complete record relating to a pledged investment security, a deposit of public funds, and a transaction related to a pledged investment security. (b) The comptroller or the public entity may examine and verify at any reasonable time a pledged investment security or a record a depository maintains under this section. Sec CHANGE IN AMOUNT OR ACTIVITY OF DEPOSITS OF PUBLIC FUNDS. A public entity shall inform the depository for the public entity's deposit of public funds of a significant change in the amount or activity of those deposits within a reasonable time before the change occurs. SUBCHAPTER C. CUSTODIAN; PERMITTED INSTITUTION Sec DEPOSIT OF SECURITIES WITH CUSTODIAN. (a) In addition to other authority granted by law, a depository for a public entity other than a state agency may deposit with a custodian a security pledged to secure a deposit of public funds. (b) At the request of the public entity, a depository for a public entity other than a state agency shall deposit with a custodian a security pledged to secure a deposit of public funds. (c) A depository for a state agency shall deposit with a custodian a security pledged to secure a deposit of public funds. The custodian and the state agency shall agree in writing on the terms and conditions for securing a deposit of public funds. (d) A custodian must be approved by the public entity and be: (1) a state or national bank that: (A) is designated by the comptroller as a state depository; (B) has its main office or a branch office in this state; and (C) has a capital stock and permanent surplus of $5 million or more; (2) the Texas Treasury Safekeeping Trust Company; (3) a Federal Reserve Bank or a branch of a Federal Reserve Bank; (4) a federal home loan bank; or (5) a financial institution authorized to exercise fiduciary powers that is designated by the comptroller as a custodian pursuant to Section (e). (e) A custodian holds in trust the securities to secure the deposit of public funds of the public entity in the depository pledging the securities. Sec DEPOSIT OF SECURITIES WITH PERMITTED INSTITUTION. (a) A custodian may deposit with a permitted institution an investment security the custodian holds under Section (b) If a deposit is made under Subsection (a): (1) the permitted institution shall hold the investment security to secure funds the public entity deposits in the depository that pledges the investment security; (2) the trust receipt the custodian issues under Section shall show that the custodian has deposited the security in a permitted institution; and (3) the permitted institution, on receipt of the investment security, shall immediately issue to the custodian an advice of transaction or other document that is evidence that the custodian deposited the security in the permitted institution. 15