KRS § 41.240 — KY Code / Title VI / Chapter 41 / Section 41.240
41.240 Pledge of collateral required of state depositories -- Qualifications for a reduced pledge -- Eligible securities and other obligations
Status: in_force

41.240 Pledge of collateral required of state depositories -- Qualifications for a

reduced pledge -- Eligible securities and other obligations.

(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 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 162.100;

(f) School building revenue bonds issued in accordance with the authority

granted under KRS 162.120 to 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.