Kentucky Statutes 41.240 – Pledge of collateral required of state depositories — Qualifications for a reduced pledge — Eligible securities and other obligations
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(1) (a) Before any bank shall be named as a state depository to receive public funds, it shall either pledge or provide to the State Treasurer collateral having an aggregate current face value or current quoted market value at least equal to the deposits as of the last business day of each quarter in which funds are so deposited or provide to the State Treasurer a surety bond or surety bonds in favor of the State Treasurer in an amount at least equal to the deposits, as of the last business day of each quarter in which funds are deposited; provided, however, that amounts insured by the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation need not be so collateralized. The president or an executive officer of each state depository shall submit to the Treasurer and the State Investment Commission a statement subscribed and sworn to by the president or executive officer showing:
1. The face value or current quoted market value of the securities or other obligations pledged as collateral; and
2. The value of surety bonds provided as of the time such surety bonds are provided as collateral.
The aggregate valuation of all pledged or provided collateral shall be reported to the State Treasurer and State Investment Commission by the state depository within ten (10) days of the close of each quarter after the date of deposit. Such value with respect to pledged collateral other than surety bonds shall be as of the end of the quarter or the preceding business day and, as to surety bonds, the market values shall be obtained from a reputable bond- pricing service. The State Treasurer and Governor may from time to time call for additional collateral to adequately secure the deposits as aggregate face or current market values may require, if the value of collateral is not compliant with state law as of the report date.
(b) No deposit of state funds shall collectively exceed at any time the state depository’s sum of capital, reserves, undivided profits and surplus or ten percent (10%) of the total deposits of the state depository, whichever is less. For purposes of this subsection only, the value of the state deposit will be determined as of the end of the last business day of each quarter that funds are deposited.
(2) (a) As an alternative to subsection (1)(a) of this section, a state depository insured by the Federal Deposit Insurance Corporation may either pledge to the State Treasurer, as collateral, securities or other obligations having an aggregate face value or a current quoted market value or provide to the State Treasurer a surety bond or surety bonds in an amount equal to eighty percent (80%) of the value of the state deposit including demand and time accounts, if the state depository is determined by the State Investment Commission to have very strong credit with little or no credit risk at any maturity level and the likelihood of short-term unexpected problems of significance is minimal or
not of a serious or long-term nature. The value of the state deposit will be determined at the end of the business day of deposit and as of the end of business on the last day of each quarter that funds are so deposited.
(b) Valuation of all pledged or provided collateral shall be reported to the State Treasurer and the State Investment Commission within ten (10) days of the close of each quarter after the date of deposit.
(c) State depositories designated as qualified for reduced pledging shall be so recorded in the executive journal.
(d) The State Investment Commission shall determine eligibility for the reduced pledging option based on totally objective and quantifiable measures of financial intermediary performance. The information for such eligibility shall be obtained from publicly available documents. The State Investment Commission shall promulgate the particular criteria of eligibility by regulations issued pursuant to KRS Chapter 13A.
(3) State depositories which do not qualify or do not choose to qualify under subsection (1) or (2) of this section shall not receive state deposits in excess of amounts that are insured by an instrumentality of the United States.
(4) Only the following securities and other obligations may be accepted by the State
Treasurer as collateral under this section:
(a) Bonds, notes, letters of credit, or other obligations of or issued or guaranteed by the United States, or those for which the credit of the United States is pledged for the payment of the principal and interest thereof, and any bonds, notes, debentures, letters of credit, or any other obligations issued or guaranteed by any federal governmental agency or instrumentality, presently or in the future established by an Act of Congress, as amended or supplemented from time to time, including, without limitation, the United States government corporations listed in KRS § 66.480(1)(c);
(b) Obligations of the Commonwealth of Kentucky including revenue bonds issued by its statutory authorities, commissions, or agencies;
(c) Revenue bonds issued by educational institutions of the Commonwealth of
Kentucky as authorized by KRS § 162.340 to KRS § 162.380;
(d) Obligations of any city of the Commonwealth of Kentucky, or any county, for the payment of principal and interest on which the full faith and credit of the issuing body is pledged;
(e) School improvement bonds issued in accordance with the authority granted under KRS § 162.080 to KRS § 162.100;
(f) School building revenue bonds issued in accordance with the authority granted under KRS § 162.120 to KRS § 162.300, provided that the issuance of such bonds is approved by the Kentucky Board of Education;
(g) Surety bonds issued by sureties rated in one (1) of the three (3) highest categories by a nationally recognized rating agency;
(h) Letters of credit issued by federal home loan banks; and
(i) Real property owned by the bank.
Effective: June 29, 2021
History: Amended 2021 Ky. Acts ch. 155, sec. 12, effective June 29, 2021. — Amended
2014 Ky. Acts ch. 92, sec. 24, effective January 1, 2015. — Amended 2001 Ky. Acts ch. 112, sec. 3, effective June 21, 2001. — Amended 1998 Ky. Acts ch. 554, sec. 1, effective July 15, 1998. — Amended 1996 Ky. Acts ch. 362, sec. 6, effective July 15,
1996. — Amended 1982 Ky. Acts ch. 382, sec. 3, effective July 15, 1982. — Amended
1978 Ky. Acts ch. 155, sec. 82, effective June 17, 1978. — Amended 1972 Ky. Acts ch. 118, sec. 1. — Amended 1952 Ky. Acts ch. 221, sec. 1, effective June 19, 1952. — Recodified 1942 Ky. Acts ch. 208, sec. 1, effective October 1, 1942, from Ky. Stat. sec. 4693.
Legislative Research Commission Note (10/5/90). Pursuant to KRS § 7.136(1), KRS Chapter 13A has been substituted for the prior reference to KRS Chapter 13 in this statute. The sections in KRS Chapter 13 were repealed by 1984 Ky. Acts ch. 417, §
36 and KRS Chapter 13A was created in that same chapter of the 1984 Ky. Acts.
1. The face value or current quoted market value of the securities or other obligations pledged as collateral; and
Terms Used In Kentucky Statutes 41.240
- Agency: means any state administrative body, program cabinet, office, department, or division. See Kentucky Statutes 41.010
- Bank: includes any bank or savings and loan association chartered by the State of Kentucky or the United States government designated to take custody of state funds on deposit, for periods greater than overnight, with the intent to honor presentments against those deposits. See Kentucky Statutes 41.010
- City: includes town. See Kentucky Statutes 446.010
- Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
- Corporation: may extend and be applied to any corporation, company, partnership, joint stock company, or association. See Kentucky Statutes 446.010
- Federal: refers to the United States. See Kentucky Statutes 446.010
- Federal Deposit Insurance Corporation: A government corporation that insures the deposits of all national and state banks that are members of the Federal Reserve System. Source: OCC
- public funds: means sums actually received in cash or negotiable instruments from all sources unless otherwise described by any state agency, state- owned corporation, university, department, cabinet, fiduciary for the benefit of any form of state organization, authority, board, bureau, interstate compact, commission, committee, conference, council, office, or any other form of organization whether or not the money has ever been paid into the Treasury and whether or not the money is still in the Treasury if the money is controlled by any form of state organization, except for those funds the management of which is to be reported to the Legislative Research Commission pursuant to KRS §. See Kentucky Statutes 446.010
- Real property: Land, and all immovable fixtures erected on, growing on, or affixed to the land.
- report: means any written method of transporting data. See Kentucky Statutes 41.010
- State: when applied to a part of the United States, includes territories, outlying possessions, and the District of Columbia. See Kentucky Statutes 446.010
- State depository: means any bank designated to take custody of state funds on deposit pursuant to KRS §. See Kentucky Statutes 41.010
- Statute: A law passed by a legislature.
- Sworn: includes "affirmed" in all cases in which an affirmation may be substituted for an oath. See Kentucky Statutes 446.010
2. The value of surety bonds provided as of the time such surety bonds are provided as collateral.
The aggregate valuation of all pledged or provided collateral shall be reported to the State Treasurer and State Investment Commission by the state depository within ten (10) days of the close of each quarter after the date of deposit. Such value with respect to pledged collateral other than surety bonds shall be as of the end of the quarter or the preceding business day and, as to surety bonds, the market values shall be obtained from a reputable bond- pricing service. The State Treasurer and Governor may from time to time call for additional collateral to adequately secure the deposits as aggregate face or current market values may require, if the value of collateral is not compliant with state law as of the report date.
(b) No deposit of state funds shall collectively exceed at any time the state depository’s sum of capital, reserves, undivided profits and surplus or ten percent (10%) of the total deposits of the state depository, whichever is less. For purposes of this subsection only, the value of the state deposit will be determined as of the end of the last business day of each quarter that funds are deposited.
(2) (a) As an alternative to subsection (1)(a) of this section, a state depository insured by the Federal Deposit Insurance Corporation may either pledge to the State Treasurer, as collateral, securities or other obligations having an aggregate face value or a current quoted market value or provide to the State Treasurer a surety bond or surety bonds in an amount equal to eighty percent (80%) of the value of the state deposit including demand and time accounts, if the state depository is determined by the State Investment Commission to have very strong credit with little or no credit risk at any maturity level and the likelihood of short-term unexpected problems of significance is minimal or
not of a serious or long-term nature. The value of the state deposit will be determined at the end of the business day of deposit and as of the end of business on the last day of each quarter that funds are so deposited.
(b) Valuation of all pledged or provided collateral shall be reported to the State Treasurer and the State Investment Commission within ten (10) days of the close of each quarter after the date of deposit.
(c) State depositories designated as qualified for reduced pledging shall be so recorded in the executive journal.
(d) The State Investment Commission shall determine eligibility for the reduced pledging option based on totally objective and quantifiable measures of financial intermediary performance. The information for such eligibility shall be obtained from publicly available documents. The State Investment Commission shall promulgate the particular criteria of eligibility by regulations issued pursuant to KRS Chapter 13A.
(3) State depositories which do not qualify or do not choose to qualify under subsection (1) or (2) of this section shall not receive state deposits in excess of amounts that are insured by an instrumentality of the United States.
(4) Only the following securities and other obligations may be accepted by the State
Treasurer as collateral under this section:
(a) Bonds, notes, letters of credit, or other obligations of or issued or guaranteed by the United States, or those for which the credit of the United States is pledged for the payment of the principal and interest thereof, and any bonds, notes, debentures, letters of credit, or any other obligations issued or guaranteed by any federal governmental agency or instrumentality, presently or in the future established by an Act of Congress, as amended or supplemented from time to time, including, without limitation, the United States government corporations listed in KRS § 66.480(1)(c);
(b) Obligations of the Commonwealth of Kentucky including revenue bonds issued by its statutory authorities, commissions, or agencies;
(c) Revenue bonds issued by educational institutions of the Commonwealth of
Kentucky as authorized by KRS § 162.340 to KRS § 162.380;
(d) Obligations of any city of the Commonwealth of Kentucky, or any county, for the payment of principal and interest on which the full faith and credit of the issuing body is pledged;
(e) School improvement bonds issued in accordance with the authority granted under KRS § 162.080 to KRS § 162.100;
(f) School building revenue bonds issued in accordance with the authority granted under KRS § 162.120 to KRS § 162.300, provided that the issuance of such bonds is approved by the Kentucky Board of Education;
(g) Surety bonds issued by sureties rated in one (1) of the three (3) highest categories by a nationally recognized rating agency;
(h) Letters of credit issued by federal home loan banks; and
(i) Real property owned by the bank.
Effective: June 29, 2021
History: Amended 2021 Ky. Acts ch. 155, sec. 12, effective June 29, 2021. — Amended
2014 Ky. Acts ch. 92, sec. 24, effective January 1, 2015. — Amended 2001 Ky. Acts ch. 112, sec. 3, effective June 21, 2001. — Amended 1998 Ky. Acts ch. 554, sec. 1, effective July 15, 1998. — Amended 1996 Ky. Acts ch. 362, sec. 6, effective July 15,
1996. — Amended 1982 Ky. Acts ch. 382, sec. 3, effective July 15, 1982. — Amended
1978 Ky. Acts ch. 155, sec. 82, effective June 17, 1978. — Amended 1972 Ky. Acts ch. 118, sec. 1. — Amended 1952 Ky. Acts ch. 221, sec. 1, effective June 19, 1952. — Recodified 1942 Ky. Acts ch. 208, sec. 1, effective October 1, 1942, from Ky. Stat. sec. 4693.
Legislative Research Commission Note (10/5/90). Pursuant to KRS § 7.136(1), KRS Chapter 13A has been substituted for the prior reference to KRS Chapter 13 in this statute. The sections in KRS Chapter 13 were repealed by 1984 Ky. Acts ch. 417, §
36 and KRS Chapter 13A was created in that same chapter of the 1984 Ky. Acts.