CHAPTER 674
An Act to amend and reenact §§2.2-4400 through 2.2-4411 of
the Code of Virginia, relating to the Virginia Security for Public Deposits
Act.
[S 456]
Approved April 12, 2010
Be it enacted by the General Assembly of Virginia:
1. That §§2.2-4400 through 2.2-4411 of the Code of Virginia
are amended and reenacted as follows:
§2.2-4400. Short title; declaration of intent; applicability.
A. This chapter may be cited as the "Virginia Security
for Public Deposits Act."
B. The General Assembly intends by this chapter to establish a
single body of law applicable to the pledge of security as collateral
for public funds on deposit deposits in financial institutions so
that the procedure for securing public deposits may be uniform throughout the
Commonwealth.
C. All public deposits in qualified public depositories that
are required to be secured by other provisions of law or by a public depositor
shall be secured pursuant to this chapter. Public depositors are required to
secure their deposits pursuant to several applicable provisions of law,
including but not limited to §§2.2-1813, 2.2-1815, 8.01-582, 8.01-600,
15.2-1512.1, 15.2-1615, 15.2-2625, 15.2-6611, 15.2-6637, 58.1-3149, 58.1-3150,
58.1-3154, and 58.1-3158.
D. This chapter, however, shall not apply to deposits made by
the State Treasurer in out-of-state financial institutions related to master
custody and tri-party repurchase agreements, provided (i) such deposits do not
exceed ten percent of average monthly investment balances and (ii) the
out-of-state financial institutions used for this purpose have a short-term
deposit rating of not less than A-1 by Standard & Poor's Rating Service or
P-1 by Moody's Investors Service, Inc., respectively.
§2.2-4401. Definitions.
As used in this chapter, unless the context requires a
different meaning:
"Dedicated method" or "opt-out method"
means the securing of public deposits without accepting the contingent
liability for the losses of public deposits of other qualified public
depositories, pursuant to §2.2-4404 and regulations and guidelines promulgated
by the Treasury Board.
"Defaulting depository" means any qualified
public depository determined to be in default or insolvent.
"Default or insolvency" includes, but shall not be
limited to, the failure or refusal of any qualified public depository to return
any public deposit upon demand or at maturity and the issuance of an order of
supervisory authority restraining such depository from making payments of
deposit liabilities or the appointment of a receiver for such depository.
"Eligible collateral" means securities of the
character or instruments authorized as legal investments under the
laws of the Commonwealth for public sinking funds or other public funds and
securities acceptable under United States Treasury Department regulations as
collateral for the security of treasury tax and loan accounts and as
well as Federal Home Loan Bank letters-of-credit that adhere to the letters
of credit issued in accordance with guidelines as promulgated by the
Treasury Board.
"Located in Virginia" means having a main office or
branch office in the Commonwealth where deposits are accepted, checks are paid,
and money is lent.
"Pooled method" means securing public deposits by
accepting the contingent liability for the losses of public deposits of other
qualified public depositories choosing this method, pursuant to §2.2-4403 and
regulations and guidelines promulgated by the Treasury Board.
"Public deposit" means moneys of moneys
held by a public depositor who is charged with the duty to receive or
administer such moneys and is acting in an official capacity, such moneys being
the Commonwealth or of any county, city, town or other political
subdivision thereof, including moneys of any commission, institution,
committee, board or officer of the foregoing and any state, circuit, county or
municipal court, which moneys are deposited in any qualified public depository deposited
in any of the following types of accounts: nonnegotiable or registered time
deposits, demand deposits, savings deposits, and or any other
transaction accounts, and security for such deposit is required by other
provisions of law, or is required due to an election of the public depositor.
"Public depositor" means the Commonwealth or any
county, city, town or other political subdivision thereof, including any
commission, institution, committee, board, or officer of the foregoing and any
state court.
"Qualified escrow agent" means the State
Treasurer or any bank or trust company approved by the Treasury Board to hold
collateral pledged to secure public deposits.
"Qualified public depository" means any national
banking association, federal savings and loan association or federal savings
bank located in Virginia, any bank, trust company or savings institution
organized under Virginia law, or any state bank or savings institution
organized under the laws of another state located in Virginia, that receives
or holds public deposits that are secured pursuant to this chapter
authorized by the Treasury Board to hold public deposits according to this
chapter.
"Required collateral" of a qualified public
depository means, (i) in the case of a bank, a sum equal to 50 percent of
the actual public deposits not covered by federal deposit insurance held at the
close of business on the last banking day in the month immediately preceding
the date of any computation of such balance, or the average balance of all
public deposits for such preceding month, whichever is greater, and (ii) in the
case of a savings and loan association or savings bank, a sum equal to 100
percent of the average daily balance for the month immediately preceding the
date of any computation of such balance of all public deposits not covered by
federal deposit insurance held by such depository but shall not be less than
100 percent of the public deposits held by such depository at the close of
business on the last banking day in such preceding month the amount of
eligible collateral required to secure public deposits set by regulations or an
action of the Treasury Board.
"Treasurer" and "public depositor"
means the State Treasurer, a county, city, or town treasurer or director of
finance or similar officer and the custodian of any other public deposits
secured pursuant to this chapter.
"Treasury Board" means the Treasury Board of the
Commonwealth created by §2.2-2415.
§2.2-4402. Collateral for public deposits.
Qualified public depositories shall elect to secure
deposits by either the pooled method or the dedicated method. Every
qualified public depository shall deposit with the State Treasurer, or, with
the approval of the Treasury Board, with the Federal Reserve Bank of Richmond
or any other bank or trust company located within or without the Commonwealth,
a qualified escrow agent eligible collateral equal to or in excess of the
required collateral of such depository to be held subject to the order of
the Treasury Board. Eligible collateral shall be valued as determined by the
Treasury Board. Substitutions and withdrawals of eligible collateral may be
made from time to time under regulations issued as determined by
the Treasury Board.
Each qualified public depository shall, at the time of the deposit
of eligible collateral, deliver to the State Treasurer a power of attorney
authorizing him to transfer any registered securities deposited, or any part
thereof, for the purpose of paying any of the liabilities provided for in this
chapter.
Notwithstanding any other provisions of law, no qualified
public depository shall be required to give bond or pledge securities or
instruments in the manner herein provided for the purpose of securing
deposits received or held in the trust department of the depository and that
are secured as required by §6.1-21 of the Code of Virginia or that are
secured pursuant to Title 12, §92a of the United States Code by securities of
the classes prescribed by §6.1-21 of the Code of Virginia.
No qualified public depository shall accept or retain any
public deposit that is required to be secured unless it has deposited eligible
collateral equal to its required collateral with some proper depository
a qualified escrow agent pursuant to this chapter.
§2.2-4403. Procedure for payment of losses by pooled method.
When the Treasury Board is advised by any treasurer or
otherwise determines that a default or insolvency has occurred with
regard to a qualified public depository securing public deposits in
accordance with this section is a defaulting depository that is a bank
not otherwise governed by §2.2-4404, it shall as promptly as practicable make
payment to the proper treasurer of all funds subject to such default or
insolvency, pursuant to take steps to reimburse public depositors for
uninsured public deposits using the following procedures:
1. The Treasury Board and the treasurer shall ascertain
the amount of uninsured public funds on deposit with the qualified
public deposits held by the defaulting depository in default or insolvent
that are secured pursuant to this chapter, either with the cooperation of
the Commissioner of Financial Institutions, the or receiver
appointed for such depository, or by any other means available, and the
amount of deposit insurance applicable to such deposits.
2. The amount of such uninsured public deposits
ascertained as provided in subdivision 1, net of applicable deposit
insurance plus any costs associated with liquidation, shall be
assessed by the Treasury Board first against the defaulting depository in
default or insolvent to the extent of the full realizable current market
value of the collateral deposited by it pledged to secure its
public deposits, and second, to the extent that such collateral.
3. In the event the realized value of the pledged
collateral in subdivision 2 is insufficient to satisfy the liability of the
defaulting depository upon its deposits secured pursuant to this
chapter against each of the to its public depositors and the Treasury
Board, the Treasury Board shall assess the remaining liability against all other
qualified public depositories not otherwise governed by §2.2-4404 according
to the ratio that the average daily balance for each month of the secured
securing public deposits held by the depository during the twelve
calendar months immediately preceding the date of the default or insolvency
with respect to which the assessment is made bears to the according to
the following ratio: total average daily public deposit balance
for each month of all secured public deposits qualified public
depository held during the immediately preceding twelve months divided by the
total average public deposit balance for the same period held by all
qualified public depositories under this section that are
banks not otherwise governed by §2.2-4404, other than the defaulting
depository, during those twelve calendar months.
3 4. Assessments made by the Treasury Board in
accordance with subdivision 3 shall be payable by the close of business on
the second business day following demand, and in case of. Upon
the failure of any qualified public depository to pay such assessment when due,
the State Treasurer shall promptly take possession of the eligible collateral
deposited with the non-paying depository's escrow agent him or with
the Federal Reserve Bank of Richmond or other bank or trust company pursuant to
this chapter and liquidate the same to the extent necessary to pay such the
original assessment and turn over such amounts received to the Treasury
Board plus any additional costs necessary to liquidate the collateral.
4 5. Upon receipt of such assessment,
payments or assessments and the net proceeds of the eligible
collateral liquidated to pay such assessments from the State Treasurer,
the Treasury Board shall reimburse the public depositors to the extent of the defaulting
depository's deposit liability to them, net of any applicable
deposit insurance.
§2.2-4404. Procedure for payment of losses by dedicated
method.
When the Treasury Board is advised by any treasurer or
otherwise determines that a default or insolvency has occurred with
regard to a qualified public depository that is a savings bank or a
savings and loan association or bank not otherwise governed by §2.2-4403
securing public deposits in accordance with this section is a defaulting
depository, it shall as promptly as practicable take steps to reimburse
public depositors make payment to the proper treasurer of all uninsured
public deposits using funds subject to such default or insolvency,
pursuant to the following procedures:
1. The Treasury Board and the treasurer shall ascertain
the amount of uninsured public funds on deposit with the qualified
public deposits held by the defaulting depository in default or insolvent
that are secured pursuant to this chapter, either with the cooperation of
the Commissioner of Financial Institutions, the or receiver
appointed for such depository or by any other means available, and the
amount of deposit insurance applicable to such deposits.
2. The amount of such uninsured public deposits
ascertained as provided in subdivision 1, plus any costs associated with
liquidation of the eligible collateral of the defaulting depository net
of applicable deposit insurance, shall be assessed by the Treasury Board
against the defaulting depository in default or insolvent. The
State Treasurer shall promptly take possession of such of the eligible
collateral deposited by such depository with him, or with any other
depository pursuant to this chapter the depository's escrow agent,
as is necessary to satisfy the assessment of the Treasury Board and shall
liquidate the same and turn over the net proceeds thereof to the
Treasury Board.
3. Upon receipt from the State Treasurer of the payments or
proceeds of the eligible collateral liquidated to pay such assessments
from the State Treasurer, the Treasury Board shall reimburse the public
depositors from the proceeds of the collateral up to the extent of the
depository's deposit liability to them, net of any applicable deposit
insurance.
§2.2-4405. Powers of Treasury Board relating to the
administration of this chapter.
The Treasury Board shall have power to:
1. Make and enforce regulations and guidelines necessary
and proper to the full and complete performance of its functions under this
chapter;
2. Prescribe and enforce regulations and guidelines fixing
terms and conditions consistent with this chapter under which public deposits may
must be received and held secured;
3. Require such additional collateral, in excess of the
required collateral of any or all qualified public depository, of any
and all such depositories as it may determine prudent under the
circumstances;
4. Determine what securities or instruments shall be
acceptable as eligible collateral, and to fix the percentage of face
value or market value of such securities or instruments that can be used
to secure public deposits;
5. Establish guidelines to permit banks to withdraw from the
procedures for the payment of losses under §2.2-4403 and instead be governed
by the procedures for the payment of losses under §2.2-4404. The guidelines
shall be, consistent with the primary purpose of protecting public
deposits;
6. Require any qualified public depository to furnish such provide
information concerning its public deposits as requested by the Treasury
Board; and
7. Determine when a default or insolvency has occurred and to
take such action as it may deem advisable for the protection, collection,
compromise or settlement of any claim arising in case of default or insolvency.
§2.2-4406. Subrogation of Treasury Board to depositor's
rights; payment of sums received from distribution of assets.
Upon payment in full to any public depositor on any claim
presented pursuant to §2.2-4403 or 2.2-4404, the Treasury Board shall be
subrogated to all of such depositor's rights, title and interest against the
depository in default or insolvent and shall share in any distribution of its
such defaulting or insolvent depository's assets ratably with other
depositors. Any sums received from any such distribution shall be paid to the
other qualified public depositories against which assessments were made, in
proportion to such assessments, net of any proper payment or expense of
the Treasury Board in enforcing any such claim.
§2.2-4407. Mandatory deposit of public funds in qualified
public depositories.
No public deposit that is Public deposits required
to be secured pursuant to this chapter shall be deposited made except
in a qualified public depository.
§2.2-4408. Authority to make public deposits.
A. All treasurers and public depositors are hereby
authorized to deposit funds make public deposits under their
control in qualified public depositories, securing such public deposits
pursuant to this chapter.
B. Local officials handling public funds deposits
in the Commonwealth may not require from a qualified public depository institution
any pledge of collateral for their deposits in such institution which is
in excess of the requirements of this chapter.
§2.2-4409. Authority to secure public deposits; acceptance of
liabilities and duties by public depositories.
All institutions located in the Commonwealth that are
permitted to hold and receive public deposits qualified public
depositories are hereby authorized to secure such public deposits
in accordance with this chapter.
Any institution accepting a public deposit that is required
to be secured pursuant to this chapter and shall be deemed to have accepted
the liabilities and duties imposed upon it pursuant to this chapter with
respect to the deposit.
§2.2-4410. Liability of public depositors.
When deposits are made in accordance with this chapter no
treasurer or official of a public depositor shall be personally liable
for any loss thereof resulting from the failure or default or
insolvency of any qualified public depository in the absence of
negligence, malfeasance, misfeasance, or nonfeasance on his part or on the part
of his assistants or employees agents.
§2.2-4411. Reports of qualified public depositories.
Within ten days By the tenth day after the end
of each calendar reporting month or when requested by the Treasury Board
each qualified public depository shall submit to the Treasury Board a
written an electronic report of such data required by the
Treasury Board to demonstrate that the current market value of its pledged
collateral was equal to or greater than the amount of required collateral for
the previous month, certified as to its accuracy by an authorized official of
the qualified public depository under oath, indicating (i) the total
amount of public deposits held by it at the close of business on the last
banking day in the month, (ii) the average daily balance for the month of all
secured public deposits held by it during the month, (iii) a detailed schedule
of pledged collateral at its current asset value for purposes of collateral at
the close of business on the last banking day in the month, and (iv) any other
information with respect to its secured public deposits that may be required by
the Treasury Board.
Each Upon request by a public depositor, a qualified
public depository shall also furnish at the same time to each public
depositor for which it holds deposits and that makes a written request therefor
provide a schedule detailing the public deposit accounts reported to the
Treasury Board for that depositor, as well as the amount of total public
deposits held by that depository at the close of the applicable month and the
total market value of the collateral securing such public deposits of
the secured public deposits to the credit of such depositor as of the close of
business on the last banking day in the month and the total amount of all
secured public deposits held by it upon such date.
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