THE ATTORNEY GEXEIRAL 

OF ?FEXAS 

December 30, 1986 

x,TQRXRY QEXRRAL 

@mrabIe F. A. Cerda Opinion No. ~~-604 

District Attorney 

P. 0. Box 340 Re: Whether a political subdivision 

Eebbronville, Texas 78361 may designate a credit union as a 

Dear Mr. Cerda: 

as a 

You ask whether a general law city may designate a credit union 

depository for municipal funds. We conclude that it may not. 

Your question arises because of a conflict between article 

depository of public funds 

2+61-4.01(a)(S), V.T.C.S.. setting forth the powers of a credit union 

and articles 2559 et seq.., V.T.C.S., governing a city’s selection of a 

depository. Article 2559, V.T.C.S., p.rovides the following in 

pertinent part: 

The governing body of every city, town and village 

in the State of Texas. incorporated under either 

the General or Special Laws, including those 

operating under special charter or amendments of 

charter adopted pursuant to the ‘Eome Rule’ 

provisions of the Constitution, is authorized to 

receive applications for the custody of city funds 

.from any banking corporation, association or 

Individual banker that may desire to be selected 

as a depository of the city, town or village. 

(Emphasis added). 

Article 2560. V.T.C.S., sets forth the following in pertinent part: 

Upon considering the applications submitted, the 

novernina bodv shall select as the deuositorv or 

depositoiies bf such funds the banking corpora- - 

tions, association or individual banker or bankers 

offering the most favorable terms and conditions 

for the handling of such funds. (Emphasis added). 

Article 2461-4.01, V.T.C.S., sets forth the general powers of a credit 

union. Subsection (a) specifically provides that 

p. 2699 
Honorable F. A. Carda - Page 2 (~~-604) 

[a] credit'union may exercise all powers nacessary 

or appropriate to accomplish the purposes for 

which it is organized and all powers granted 

corporations authorized to do business in this 

state. These powers include, but are not limited 

to, the power to: 

. . . . 

(8) act as agent or depository of the United 

States, any agent or instrumentality of the United 

States, this or any other state, ot any city, 

town. village, county, school district. municipal 

corporation, political subdivision, or taxing 

authority of this or any other state, accept for 

deposit the funds of such an entity or both. . . . 

(Emphasis added). 

V.T.C.S. art. 2461-4.01(a)(8). It is clear that a credit union is 

authorized to act as a depository of a city's public funds. At issue 

is whether a city may choose a credit union as a depository and 

specifically whether a credit union is a "banking corporation, 

sssociation or.individual banker" for purposes of article 2559 c 

s, V.T.C.S. On the basis of .prior authority, we conclude that it 

is not. Article 2461-4.01. V.T.C.S., authorizes credit unions to 

.receive deposits from political subdivisions; it does not authorize 

political subdivisions to make such deposits in. credit unions. 

See Attorney General Opinion H-723 (1975). - 

Ii Attorney General Opinion MW-534 (1982). this office concluded 

that neither a credit union nor a' ssvings and loan could serve as a 

depository for a hospital district. Citing prior opinions of this 

office which hold that savings and loan associations were not embraced 

.by the phrase "banking corporation, association or individual banker" 

for purposes of articles 2544 through 2558a. V.T.C.S., governing a 

county's selection of a depository (made applicable to hospital 

districts by article 4494n. 110, V.T.C.S.), the opinion extended the 

same rationale to credit unions as well. See Attorney General 

Opinions MW-272 (1980) (reaches credit unions aGel as savings and 

loan associations); E-1013 (1977) (soil and water conservation 

district not authorized to deposit funds in savings and loan 

associations); E-723 (1975) (same with regard to political subdivisions); M-22 (1967) (concluding that "banking corporations, 

associations or individual banker" does not include savings and loan 

associations for purposes of the depository statutes). Cf. Attorney 

General Opinion JM-42 (1983) (PTA funds may be depositedin credit 

union where statutes do not govern disposition of funds). The opinion 

relied in part upon the policy considerations set forth In an earlier 

opinion of this office, Attorney General Opinion WW-838-A (1961). 

which held inapplicable to credit unions an article of the banking 

p. 2700 
Honorable F. A. Cerda - Page 3 (J-M-604) 

code which prohibits "branch banking." In that earlier opinion this 

office declared: 

[Although] credit unions exercise two of the most 

important functions of banking, the receiving of 

deposits and the lending of money, it must be 

recognized that credit unions or associations are 

not 'banks' as that term is defined in the Texas 

Banking Code of 1943 . . . [citation omitted1 or 

as that term is commonly used or understood. 

Furthermore, the operations of a credit union In 

receiving deposits or lending money are 

substantially different from the corresponding 

operations of a commercial bank, snd in fact, the 

functions and underlying concept of a credit union 

are basically different from those of a commercial 

bank. 

The opinion then detailed other basic functions 

distinguish both banks from credit unions and banks 

loan associations. Cf. Attorney General Opinion 

withdrawn and replaced by Attorney General Opinion 

(also indexed as -Attorney-General bpinion C-87 

we conclude that a city may not designate 

depository. 

of banking that 

from savings and 

NW-1498 (1962)) 

NW-1498-A (1963) 

(1963)). Accordingly, 

a credit union as a 

SUMMARY 

Article 2559, V.T.C.S., does not 

city to designate a credit union as 

for city funds. 

authorize s 

a depository 

JIM MATTOX 

Attorney General of Teras 

JACK HIGHTONER 

First Assistant Attorney General 

MARY KFLLER 

Executive Assistant Attorney General 

RICK GILPIN 

Chairman, Opinion Committee 

Prepared by Jim Moellinger 

Assistant Attorney General 

p. 2701