`[Federal Register Volume 61, Number 121 (Friday, June 21, 1996)]
[Proposed Rules]
[Pages 31879-31881]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-15900]



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DEPARTMENT OF THE TREASURY

Fiscal Service

31 CFR Part 202

RIN 1510-AA42


Depositaries and Financial Agents of the Federal Government

AGENCY: Financial Management Service, Fiscal Service, Treasury.

ACTION: Proposed rule.

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SUMMARY: This proposes to revise regulations which govern the 
designation of Depositaries and Financial Agents of the Federal 
Government (depositaries); their authorization to accept deposits of 
public money and to perform other specific services; and the securing 
of public money. The proposed revisions update, clarify, and simplify 
current requirements, but do not change them. Outdated references to 
specific acceptable insurers are deleted. Existing language concerning 
the types and valuation of acceptable collateral securities and the 
authorization for depositaries to perform services other than 
acceptance of insured deposits is clarified. In addition, various 
references are updated.

DATES: Comments must be submitted on or before August 5, 1996.

ADDRESSES: All comments concerning these proposed regulations should be 
addressed to the Cash Management Policy and Planning Division, 
Financial Management Service, 401 14th Street, S.W., Room 420, 
Washington, DC 20227, Attn. Donald E. Clark.

FOR FURTHER INFORMATION CONTACT: Donald E. Clark, (202) 874-7106 
(Financial Program Specialist, Cash Management Policy and Planning 
Division) or Cynthia L. Johnson, (202) 874-6590 (Director, Cash 
Management Policy and Planning Division).

SUPPLEMENTARY INFORMATION:

Background

    Depositaries accepting deposits of public money and providing other 
financial agency services to the United States are required to pledge 
adequate acceptable securities as collateral, as directed by the 
Secretary of the Treasury (Secretary). The Secretary previously 
promulgated regulations, codified at 31 CFR part 202, setting forth the 
general requirements for designating depositaries and the pledging of 
collateral to secure public money held by depositaries.
    Since these regulations were last amended, the Secretary has 
revised the types and valuations of acceptable collateral for securing 
public money referenced in this part. In addition, these regulations 
reference the Federal Savings and Loan Insurance Corporation (FSLIC) as 
an acceptable insurer of deposits. FSLIC has been abolished.

Summary of Changes

1. Types and Valuation of Acceptable Collateral Securities

    The current rule provides that certain identified securities are 
acceptable as collateral at face value, unless otherwise specified by 
the Secretary. The Secretary has recognized that the use of face value 
for managing the level of pledged collateral is problematic because the 
true value of a security is rarely the face value, except on the day of 
redemption. A common practice of the Federal Reserve bank and United 
States Department of the Treasury when valuing collateral is to apply 
market discounts, i.e., subtractions, to the value of the collateral to 
account for market volatility due to interest rate fluctuations, the 
quality of the security pledged, or the financial instability of the 
pledging institution. Therefore, since this Part was last amended, the 
Secretary has ``otherwise specified'' that certain securities, 
including certain of those expressly referenced in the current rule, 
are acceptable only at 90% of face value, rather than at 100% of face 
value.
    Because the Secretary has otherwise specified the types and 
valuations of acceptable collateral securities, revision of this part 
will eliminate any possible confusion regarding acceptable collateral 
security types and valuation under this part. The proposed rule 
provides that types and valuation of acceptable collateral securities 
will be specified in Treasury procedural instructions. Treasury issued 
these procedural instructions to Federal Reserve banks, which 
disseminated them to financial institutions pledging collateral under 
this Part.

2. Financial Institution Insurers

    The current rule provides that eligible banks insured by the 
Federal Deposit Insurance Corporation (FDIC) and eligible institutions 
insured by FSLIC are designated as depositaries. The proposed rule 
deletes references to FSLIC, which has been abolished, and

[[Page 31880]]

provides that eligible financial institutions insured by the FDIC are 
designated as depositaries.

3. Authorities

    The current rule includes as authorities 12 U.S.C. 1709(a) and 12 
U.S.C. 1725(d). The proposed rule corrects a typographical error, 
replacing 12 U.S.C. 1709(a) with 12 U.S.C. 1789a, and removes citations 
to 12 U.S.C. 1725(d), as that statute has been repealed. In addition, 
the proposed rule lists 12 U.S.C. 90 and 12 U.S.C. 391 as additional 
applicable authorities. These authorities pertain to national banking 
associations and Federal Reserve banks, respectively, as depositaries 
when so designated by the Secretary.

4. Depositary Authorization to Perform Services Other than Acceptance 
of Insured Deposits

    The current rule provides that upon the request of a Federal 
agency, the Secretary may authorize a depositary to perform services 
(other than the acceptance of Federal or state insured deposits) 
specifically requested by the agency, ``including'' various listed 
services. The proposed rule deletes references to ``upon the request 
of'' and ``specifically requested by'' a Government agency, and revises 
the term ``including'' to read ``including, but not limited to'' in 
order to clarify Treasury's longstanding interpretation of these 
provisions.

5. Disposition of Principal and Interest Payments on Pledged Collateral 
after a Depositary is Declared Insolvent

    The current rule provides that in the event of a depositary's 
insolvency or closure, or in the event of the appointment of certain 
officers to terminate its business, the depositary agrees that all 
principal and interest payments on any security pledged to protect 
public monies due on or after the date of insolvency or closure shall 
be held separate and apart from any other assets and be available to 
satisfy any claim of the United States. The proposed rule clarifies 
Treasury's longstanding interpretation that the term ``any claim of the 
United States'' includes claims not arising out of the depositary 
relationship for which the collateral was pledged.

6. Additional Administrative Revisions

    The proposed rule makes certain administrative revisions necessary 
to update existing regulatory language. These administrative revisions 
include (1) notification that financial institutions may obtain forms 
from Federal Reserve banks; (2) removal of the word ``every'' from 
certain listed classes of financial institutions designated as 
depositaries, for consistency reasons; (3) removal of references to 
Treasury Tax and Loan depositaries governed by 31 CFR part 203 
receiving deposits representing payments for certain United States 
obligations, as such depositaries are no longer authorized to perform 
these functions; (4) revision of references to a depositary's entering 
into a ``contract of deposit'' with Treasury to read ``agreement of 
deposit,'' in order to reaffirm Treasury's longstanding interpretation 
that such agreements are not procurements; (5) updating the address for 
Treasury's Financial Management Service; and (6) updating citations to 
applicable equal employment opportunity statutes and regulations.

Rulemaking Analysis

Executive Order 12866

    It has been determined that this regulation is not a significant 
regulatory action as defined in Executive Order 12866. Therefore, a 
Regulatory Assessment is not required.

Regulatory Flexibility Act

    It is hereby certified pursuant to the Regulatory Flexibility Act 
that this revision will not have a significant economic impact on a 
substantial number of small business entities. This revision makes no 
change to current procedures and only updates, clarifies, and 
simplifies the current rule. Accordingly, a Regulatory Flexibility Act 
analysis is not required.

Notice and Comment

    Public comment is solicited on all aspects of this proposed 
regulation. Treasury will consider all comments made on the substance 
of this proposed regulation, but does not intend to hold hearings.

List of Subjects in 31 CFR Part 202

    Banks, Banking.

    For the reasons set out in the preamble, 31 CFR part 202 is 
proposed to be amended as follows.

PART 202--DEPOSITARIES AND FINANCIAL AGENTS OF THE FEDERAL 
GOVERNMENT

    1. The authority citation for part 202 is revised, and the 
authority citations at the end of the sections are removed, to read as 
follows:

    Authority: 12 U.S.C. 90; 12 U.S.C. 265-266; 12 U.S.C. 391; 12 
U.S.C. 1464(k); 12 U.S.C. 1789a; 12 U.S.C. 3101-3102.

    2. Section 202.1 is revised to read as follows:


Sec. 202.1  Scope of regulations.

    The regulations in this part govern the designation of Depositaries 
and Financial Agents of the Federal Government (hereinafter referred to 
as depositaries), and their authorization to accept deposits of public 
money and to perform other services as may be required of them. Public 
money includes, but is not limited to, revenue and funds of the United 
States, and any funds the deposit of which is subject to the control or 
regulation of the United States or any of its officers, agents, or 
employees. The designation and authorization of Treasury Tax and Loan 
depositaries for the receipt of deposits representing Federal taxes are 
governed by the regulations in part 203 of this chapter.
    3. Section 202.2 is amended by revising paragraph (a)(1), removing 
paragraph (a)(2), by redesignating paragraphs (a)(3) and (a)(4) as 
(a)(2) and (a)(3), and by revising redesignated paragraphs (a)(2) and 
(a)(3) to read as follows:


Sec. 202.2  Designations.

    (a) * * *
    (1) Financial institutions insured by the Federal Deposit Insurance 
Corporation.
    (2) Credit unions insured by the Administrator of the National 
Credit Union Administration.
    (3) Banks, savings banks, savings and loan, building and loan, and 
homestead associations, credit unions created under the laws of any 
State, the deposits or accounts of which are insured by a State or 
agency thereof or by a corporation chartered by a State for the sole 
purpose of insuring deposits or accounts of such financial 
institutions, United States branches of foreign banking corporations 
authorized by the State in which they are located to transact 
commercial banking business, and Federal branches of foreign banking 
corporations, the establishment of which has been approved by the 
Comptroller of the Currency.
    (b) * * *
    4. Section 202.3 is amended by revising paragraphs (a), (b)(1) 
introductory text, (b)(2), introductory text, and (b)(2)(i) to read as 
follows:


Sec. 202.3  Authorization.

    (a) To accept deposits covered by the appropriate Federal or State 
insurer. Every depositary is authorized to accept a deposit of public 
money in an official account, other than an account in the name of the 
United States Treasury, in

[[Page 31881]]

which the maximum balance does not exceed the ``Recognized Insurance 
Coverage.'' ``Recognized Insurance Coverage'' means the insurance 
provided by the Federal Deposit Insurance Corporation, the National 
Credit Union Share Insurance Fund, and by insurance organizations 
specifically qualified by the Secretary of the Treasury.
    (b) To perform other services. (1) The Secretary of the Treasury 
may authorize a depositary to perform other services including, but not 
limited to: * * *
    (2) To obtain authorization to perform services, a depositary must:
    (i) File with the Secretary of the Treasury an appropriate 
agreement and resolution of its board of directors authorizing the 
agreement (both on forms prescribed by the Financial Management Service 
and available from Federal Reserve banks), and
* * * * *
    5. Section 202.4 is amended by revising introductory text and 
paragraphs (c), (d), and (e) to read as follows:


Sec. 202.4  Agreement of deposit.

    A depositary which accepts a deposit under this part enters into an 
agreement of deposit with the Treasury Department. The terms of this 
agreement include:
* * * * *
    (c) The provisions prescribed in Executive Order 11246, entitled 
``Equal Employment Opportunity,'' as amended by Executive Orders 11375 
and 12086, and regulations issued thereunder at 41 CFR Chapter 60, as 
amended.
    (d) The requirements of section 503 of the Rehabilitation Act of 
1973, as amended, and the regulations issued thereunder at 41 CFR part 
60-741, requiring Federal contractors to take affirmative action to 
employ and advance in employment qualified individuals with 
disabilities.
    (e) The requirements of section 503 of the Vietnam Era Veterans' 
Readjustment Assistance Act of 1972, as amended, 38 U.S.C. 4212, 
Executive Order 11701, and the regulations issued thereunder at 41 CFR 
parts 60-250 and 61-250, requiring Federal contractors to take 
affirmative action to employ and advance in employment qualified 
special disabled and Vietnam Era veterans.
    6. Section 202.6 is amended by revising paragraphs (b) and (e)(1) 
to read as follows:


Sec. 202.6  Collateral security.

* * * * *
    (b) Acceptable security. Types and valuations of acceptable 
collateral security will be specified by the Secretary of the Treasury 
in Treasury procedural instructions.
* * * * *
    (e) Disposition of principal and interest payments of the pledged 
securities after a depositary is declared insolvent--(1) General. In 
the event of the depositary's insolvency or closure, or in the event of 
the appointment of a receiver, conservator, liquidator, or other 
similar officer to terminate its business, the depositary agrees that 
all principal and interest payments on any security pledged to protect 
public monies due as of the date of the insolvency or closure, or 
thereafter becoming due, shall be held separate and apart from any 
other assets and shall constitute a part of the pledged security 
available to satisfy any claim of the United States, including those 
not arising out of the depositary relationship.
* * * * *
    7. Section 202.7 is amended by revising paragraph (a) to read as 
follows:


Sec. 202.7  Maintenance of balances within authorizations.

    (a) Government agencies shall contact the Department of the 
Treasury, Financial Management Service, before making deposits with a 
financial institution insured by a State or agency thereof or by a 
corporation chartered by a State for the sole purpose of insuring 
deposits or accounts. The contact should be directed to the Cash 
Management Policy and Planning Division, Federal Finance, Financial 
Management Service, Department of the Treasury, Washington, DC 20227.
* * * * *
    Dated: June 14, 1996.
Russell D. Morris,
Commissioner.
[FR Doc. 96-15900 Filed 6-20-96; 8:45 am]
BILLING CODE 4810-35-P`