New Jersey-2018-S2995-Introduced

An Act concerning banks and public funds, amending P.L.1977, c.281, and amending and supplementing P.L.1956, c.174.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. Section 1 of P.L.1956, c.174 (C.52:18-16.1) is amended to read as follows:

1. The State Treasurer shall, except as otherwise provided, deposit to his credit as treasurer all public moneys coming into his hands, within 3 days after receiving the same, in such of the national banks located in this State, in institutions authorized by this State to carry on a banking or savings and loan business, and in the State of New Jersey Cash Management Fund established pursuant to section 1 of this amendatory and supplementary act as he may select, that will allow interest on all balances. In so doing, the treasurer shall from time to time, by public notice, offer at auction State deposits and invite tenders therefor subject to such terms and conditions as he may prescribe. Any institution that seeks to enter into a contract to serve as a depository of public funds, or that serves as a depository of public funds pursuant to this section shall conform with the requirements of section 3 of P.L. c. (C. )(pending before the Legislature as this bill). All interest earned on deposits shall be credited to the State. When in the judgment of the State Treasurer it is not compatible with the working capital requirements of the State or with public safety to deposit public moneys or portion thereof, upon interest-bearing terms, as heretofore provided in this section, the State Treasurer may deposit the same without interest or open-time accounts with interest subject to withdrawal upon notice, conforming with Federal laws and regulations governing the same, in such of the national banks located in this State and institutions authorized by this State to carry on a banking or savings and loan business as he may select, until such a condition has, in his judgment, ceased to exist.

In all cases where a deposit is made in a national bank located in this State or institution authorized by this State to carry on a banking or savings and loan business, pursuant to this section, the State Treasurer shall require from any such institution a deposit of bonds, notes, certificates of indebtedness or bills or other obligations of or guaranteed by the United States; or bonds or other obligations of or guaranteed by the State of New Jersey; or any other obligations now or hereafter authorized by law as security for public deposits; designed to secure any deposit made pursuant to this section; provided, that such requirement shall be deemed to be met if the Federal Reserve Bank of New York or the Federal Reserve Bank of Philadelphia or any other banking institution with total assets in excess of $300,000,000.00 located within the Second or Third Federal Reserve Districts and approved for such purpose by the State Treasurer certifies to the State Treasurer that, pursuant to authority given by the depository, it holds obligations, owned by the depository, of the kind and in the amount required by the State Treasurer to secure any such deposit. No bank shall be permitted to hold securities, of the kind hereinbefore described, as security for public moneys on deposit in the same bank.

No State or national bank or savings and loan association in which the State Treasurer makes deposits of public moneys as above provided shall be required to secure such deposits as required by this section, to the extent that such deposits are insured by the Federal Deposit Insurance Corporation [or by the Federal Savings and Loan Insurance Corporation] or by any other Federal agency which insures deposits made in state or national banks or savings and loan associations.

(cf: P.L.1977, c.339, s. 1)

2. Section 1 of P.L.1977, c.281 (C.52:18A-90.4) is amended to read as follows:

1. a. Notwithstanding the provisions of section 2 of P.L.1970, c.270 (C.52:18A-90.2), the Director of the Division of Investment may, subject to the approval of the State Investment Council and the State Treasurer, establish, maintain and operate a common trust fund to be known as the State of New Jersey Cash Management Fund in which may be deposited the surplus public moneys of the State, its counties, municipalities and school districts and the agencies or authorities created by any of these entities. This fund shall be considered a legal depository for public moneys and shall satisfy the requirements in that regard of section 1 of P.L.1956, c.174 (C.52:18-16.1) and N.J.S.40A:5-14.

b. The State Treasurer shall be the custodian of the fund and may receive public moneys paid into the fund by any other custodian of public moneys for the purpose of holding and investing said moneys. In that capacity, he may enter into an agreement with any one or more of the national banks and the banks authorized by this State to carry on a banking business, as he may select, for the custodianship of securities held in the fund and for recording the amounts deposited and withdrawn by each participant, the investment transactions entered into, and the balance to each participant's credit each day. A bank selected by the State Treasurer as custodian pursuant to this section shall have a physical presence in this State in the form of a principal office or branch office [and] , shall employ New Jersey residents, and shall conform with the requirements of section 3 of P.L. c. (C. )(pending before the Legislature as this bill). Each bank selected by the State Treasurer may use recognized depositories or clearinghouses for the securities held in the fund or may use other banks as sub-custodians or sub-fiscal agents for these securities, provided that in every case each bank selected by the State Treasurer shall retain primary responsibility for these securities.

c. If a bank selected by the State Treasurer delegates its responsibilities as custodian or fiscal agent, or both, to a sub-custodian or sub-fiscal agent, the sub-custodian or sub-fiscal agent shall be responsible for the services delegated to it to the same degree as the primary custodian or primary fiscal agent and shall maintain accounting records and be otherwise held accountable to the same degree of fiduciary duty and responsibility as the appointing primary custodian or fiscal agent.

d. A bank selected by the State Treasurer as a primary custodian or fiscal agent which delegates its responsibilities as custodian or fiscal agent, or both, to a sub-custodian or sub-fiscal agent, shall not be relieved of its fiduciary duties and responsibilities.

e. The State Treasurer may promulgate such rules and regulations pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), as he deems necessary for the efficient administration of the State of New Jersey Cash Management Fund, including but not limited to, (1) the specification of minimum amounts which may be deposited in the fund and minimum periods of time for which deposits shall be retained in the fund; (2) creation of a reserve for losses; (3) provision for payment of administration expenses from its earnings; and (4) distribution of the earnings in excess of such expenses or allocation of losses to the several participants in a manner which equitably reflects the differing amounts of their respective investments and the differing periods of time for which such amounts were in the custody of the fund.

f. The Director of the Division of Investment may invest the public moneys constituting the State of New Jersey Cash Management Fund in the same types of investments and subject to the same limitations provided for the investment of funds in the State Treasury. The director shall be responsible for the adequacy of the accounting services provided by the custodian bank and shall maintain such accounting records as may be required for that purpose.

g. The Director of the Division of Investment may establish separate sub-funds within the State of New Jersey Cash Management Fund or establish a separate fund where the public moneys are invested in tax-exempt securities in order to segregate and account for separately the investment of moneys from participants in the fund to comply with federal law and regulations governing tax-exempt securities, provided however, that such sub-funds or funds shall be subject to all laws and regulations that apply to the State of New Jersey Cash Management Fund.

(cf: P.L.2009, c.150, s.1)

3. (New section) a. Any bank that serves as a depository of public moneys of the State pursuant to section 1 of P.L.1956, c.174 (C.52:18-16.1) or section 1 of P.L.1977, c.281 (C.52:18A-90.4) shall provide to the State Treasurer:

(1) a statement of community reinvestment activities. The statement shall be specific to New Jersey and contain, but not be limited to, the following information:

(a) the number, size, and type of small business loans;

(b) the number of home mortgages;

(d) the number of community development loans;

(e) the number of investments within the State of New Jersey; and

(f) any participation in the Banking Development District Program, pursuant to P.L.2011, c.24 (C.17:16Z-1 et seq.).

(2) a statement of corporate citizenship, which shall contain, but not be limited to, a description of participation in charitable programs or scholarships within the State of New Jersey, and internal policies regarding the utilization of subcontractors who are designated as owned by women, minorities, or persons with disabilities; and

(3) a certification as to whether the bank:

(a) is currently in compliance with all applicable consumer financial protection laws, including any law or regulation that prohibits illegal predatory consumer adverse practices, including those used as a basis for an employee's compensation, promotion, or discipline;

(b) sets or allows individual or branch-level goals or requirements for the sale of a consumer financial service;

(c) considers the quantity of an employee's sales of consumer financial products and services as a basis for the employee's advancement, discipline, termination, or compensation; and

(d) has policies, protocols, and training in place at both the employee and management level designed to prevent the abuse of sales of consumer financial services and products.

b. The information required pursuant to subsection a. of this section shall be provided on a form created by the State Treasurer, and signed by an authorized representative of the bank. The information shall be provided when a bank seeks to enter into a contract to serve as a depository of public funds, or prior to its selection as a custodian of public funds, and shall be provided annually by July 1 of each year if the bank is selected as a depository of public funds. The information filed by the bank shall be posted on the website of the State Treasurer for public viewing within 60 days of the beginning of each new fiscal year, and shall be available for public inspection and copying.

4. This act shall take effect immediately, and apply to contracts entered into by the State for deposits of public funds after that date.

STATEMENT

This bill establishes certain requirements for banks that serve as depositories of public funds.

Under current law, the State Treasurer is required to deposit all public moneys in national banks located in this State, in institutions authorized by this State to carry on a banking or savings and loan business and in the State of New Jersey Cash Management Fund. Current law places certain requirements on how and where the State Treasurer deposits those funds.

Under the bill, any bank which seeks to enter into a contract to serve as a depository for State funds or is selected to serve as a custodian of State funds must provide to the State Treasurer certain information, including a statement of community reinvestment activities, a statement of corporate citizenship, and a consumer protection certification.

The statement of community reinvestment activities must be specific to New Jersey and contain, but not be limited to, the following information:

(1) the number, size, and type of small business loans;

(2) the number of home mortgages;

(3) the number of home improvement loans;

(4) the number of community development loans;

(5) the number of investments within the State of New Jersey; and

(6) any participation in the Banking Development District Program.

A bank must also provide a statement of corporate citizenship, which must contain, but not be limited to, information on the bank's participation in charitable programs or scholarships within the State of New Jersey, and internal policies regarding the utilization of subcontractors who are designated as owned by women, minorities, or persons with disabilities.

The bill also requires a participating bank to certify as to whether it:

(1) is currently in compliance with all applicable consumer financial protection laws, including any law or regulation that prohibits illegal predatory consumer adverse practices, including those used as a basis for an employee's compensation, promotion, or discipline;

(2) sets or allows individual or branch-level goals or requirements for the sale of a consumer financial service;

(3) considers the quantity of an employee's sales of consumer financial products and services as a basis for the employee's advancement, discipline, termination, or compensation; and

(4) has policies, protocols, and training in place at both the employee and management level designed to prevent the abuse of sales of consumer financial services and products.

The bill requires the information to be provided on a form created by the State Treasurer, and signed by an authorized representative of the bank. The information must be provided when a bank first seeks to enter into a contract to serve as a depository of public funds, or prior to its selection as a custodian of public funds, and then annually by July 1 of each year. The information filed by the bank must be posted on the website of the State Treasurer for public viewing within 60 days of the beginning of each new fiscal year, and be available for public inspection and copying.