Source: https://tfm.fiscal.treasury.gov/v3/p5/c1000.html
Timestamp: 2019-04-25 20:20:18
Document Index: 796561786

Matched Legal Cases: ['art 5', 'art 202', 'art 202', 'art 202', 'art 202', 'art 380', 'art 330', 'art 202']

Securing Government Funds Deposit Depositary
TFM | Volume III | Part 5 | Chapter 1000
SECURING GOVERNMENT FUNDS ON DEPOSIT WITH A DEPOSITARY
This chapter prescribes depositary requirements for securing federal agency funds on deposit.
Section 1010—Applicability
When a federal agency places funds on deposit with a financial institution, the financial institution must pledge collateral under conditions described in this chapter. The pledging of collateral by a financial institution is necessary to protect the federal government against risk of loss. State, local, and municipal deposits are not covered under this chapter.
Section 1020—Definitions
Collateral Management System (CMS)—An application operated by the Federal Reserve Bank (FRB) that maintains a record of and values collateral pledged in Fedwire book-entry, non-Fedwire book-entry, or in definitive (physical) form for all Treasury collateral programs administered by the FRBs. FRBs process collateral transactions maintained and valued on this system.
Demand Deposits—Funds held by a financial institution that the owner can withdraw at any time without prior notice. Checking accounts are the most common form of a demand deposit.
Depositary—A financial institution designated by Treasury to hold public money and perform other services per 31 CFR Part 202. Agencies that have the requisite statutory authority to hold public funds outside of the Treasury must use depositaries to hold those funds unless their statutes otherwise provide.
Financial Institution—A bank, savings and loan, credit union, or other such entity as defined under 31 CFR Part 202.
Form FS-5902-Collateral Security Resolution—A form that establishes the right of Treasury to secure an interest in a financial institution's assets.
Form FS-5903-Collateral Pledge and Security Agreement—A form that memorializes the agreement for a financial institution to pledge collateral security in exchange for placing funds on deposit.
Official Custodian—A Government official that has plenary authority to control funds possessed by the public unit the custodian is appointed or elected to serve. Control of public funds includes possession and the authority to establish accounts for such funds in insured depositaries; and to make deposits, withdrawals, and disbursements of such funds.
Recognized Insurance Coverage—Insurance coverage provided by the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Share Insurance Fund, administered by the National Credit Union Administration (NCUA), and other qualified organizations recognized by Treasury under 31 CFR Part 202.
Time and Savings Deposits—Time deposits are deposits subject to an interest penalty if withdrawn before a specific maturity date. Savings deposits are deposits subject to limitations on withdrawal, including advance notice of intent to withdraw funds from the savings deposit.
TCMM Treasury Operations Team—An FRB unit providing centralized customer service for Treasury collateral programs for eligible securities, or other financial assets pledged as collateral to secure public funds.
Section 1025—Responsibilities for Public Money
Treasury’s Bureau of the Fiscal Service (Fiscal Service) promulgates rules and provides guidance for the security of public money on deposit in depositaries. The rules outlining broad policy objectives with securing such funds and related collateral guidance are referenced in 31 CFR Part 202 and 31 CFR Part 380. The TFM provides more detailed policy guidance and detailed procedures that agencies, depositaries, and FRBs must follow to ensure the funds are secured. Each agency must remain informed of and compliant with the latest collateral regulations, rules, and procedures.
Fiscal Service determines the types of acceptable collateral depositaries can use to secure deposits of public money. Fiscal Service also determines appropriate margins on pledged collateral.
1025.10—Depositaries
complete FS Form 5902: Resolution Authorizing Execution of Depositary, Financial Agency, and Collateral Agreement; and FS Form 5903: Depositary, Financial Agency, and Collateral Agreement (see Section 1030) and submit these forms to the TCMM Operations Team to establish collateral security accounts,
pledge sufficient eligible collateral security as required by the Secretary of the Treasury and make such substitutions or additions as needed. See the TreasuryDirect website,
provide agencies and FRBs with requested information, and
1025.20—FRBs
1025.30—TCMM Operations Team
ensure that pledged collateral is eligible and sufficient to secure deposits of public money,
maintain and distribute FS Form 5902 and FS Form 5903,
maintain a current list of collateral contacts,
make available the FRB Security Account Holdings Report and the Collateral Monitoring Recap Report to agencies on a monthly basis through TCMM system,
make available the Collateral Monitoring Recap Report to depositaries on a monthly basis through TCMM system,
open collateral accounts in NBES, CMS, and TCMM system, and
1025.40—Agencies
establish a TCMM account and V account by completing the TCMM Agency Access Form available on Treasury Collateral Management and Monitoring website,
provide the TCMM Operations Team with a timely annual update of contact information,
notify the TCMM Operations Team immediately when there are changes to authorized individuals. See the Treasury Collateral Management and Monitoring website to obtain the form to update contact information,
provide timely address changes to the TCMM Operations Team,
notify Fiscal Service in writing when canceling a V account. The agency must state that it no longer has collateral holdings and no longer needs the V account,
develop and maintain internal operating procedures to ensure the security of public money. Fiscal Service may request a copy of agency procedures,
ensure that TCMM system has the most accurate and up-to-date amount on deposit to be collateralized. This allows the TCMM Operations Team to maintain sufficient collateral in excess of the recognized deposit insurance limit. See 12 CFR Part 330 (Deposit Insurance Coverage), and
1025.50—Fiscal Service
The role of Fiscal Service is to:
assign and maintain V account numbers and provide agency information to the FRB so that the FRB may establish accounts,
establish collateral policy,
establish and maintain lists of acceptable collateral and assigned margins. See the TreasuryDirect website, and
periodically update the criteria and guidance for acceptable collateral and applicable margins. See the TreasuryDirect website.
Section 1030—Financial Institution Agreement
To accept deposits of public money, a financial institution must be designated by Treasury as a depositary and financial agent of the federal government under 31 CFR Part 202. Before accepting deposits in excess of the recognized insurance coverage, each depositary must complete FS Form 5902 and FS Form 5903.
The financial institution must complete and return the forms to the TCMM Operations Team before a collateral account is established or securities are deposited. The depositary should not hold any funds not protected by recognized insurance coverage or collateral pledged as a surety. The TCMM Operations Team maintains all pledging documentation. This includes the FS Form 5902 and FS Form 5903 and any other pertinent collateral transaction documents.
Section 1035—Acceptable Collateral
Unless otherwise specified by the Secretary of the Treasury, depositaries may pledge collateral in the form of transferable securities of any of the acceptable classes as noted in Fiscal Service guidance. The FRB accepts collateral at values (mark to market) it assigns. See the TreasuryDirect website.
Section 1040—Receiving Collateral
If an agency expects its account balance to exceed the recognized deposit insurance limit, it must set the new amount to be collateralized in TCMM system to ensure effective monitoring of collateral. As long as a depositary supplies the V account number and has completed FS Form 5902 and FS Form 5903, the TCMM Operations Team must accept the pledge of acceptable collateral.
When the TCMM Operations Team receives pledging instructions from the depositary, it must determine if the agency has been assigned a V account number. If not, the TCMM Operations Team must advise the agency to contact Fiscal Service for an account number assignment. If the depositary has not previously pledged securities to an agency, it must complete the FS Form 5902 and FS Form 5903. The TCMM Operations Team sends these forms to the depositary (see Section 1030). The TCMM Operations Team also determines if the securities pledged are acceptable as collateral (see Section 1035). All district FRBs deposit the securities into the depositary’s safekeeping account pledged to the agency.
The FRB may receive a deposit of securities from an off-line depositary without prior receipt instructions. In this case, the securities operations staff at the district FRB should not reverse the deposit automatically but should contact the depositary to determine the proper disposition of the deposit of securities.
Section 1045—Excess Collateral
A depositary must pledge all collateral to a specific agency V account. If a depositary pledges collateral in excess of the requested amount, the entire pledge is applied to the indicated agency account. For example, Agency “X” requests a pledge of $103,000. The depositary chooses to pledge $105,000 because of the profile of its securities portfolio. Agency “X” is credited with the entire $105,000 pledge, not just the $103,000 requested. The depositary may not pledge the excess $2,000 to agency “Y”. The depositary must pledge additional, separate securities to satisfy agency “Y’s” collateral requirement.
Section 1050—Maturing Securities
1050.10—Substitution Required
1050.20—Substitution Not Required
1050.30—Substitution Required but Not Received
Section 1055—Depositary Mergers
It is important that agency and TCMM Operations Team collateral records correctly reflect the outcome of depositary mergers. This ensures that collateral deficiencies do not develop. When an agency maintains accounts with two depositaries, each account is separately insured by recognized deposit insurance. If two depositaries serving the same agency merge, the surviving depositary may need to pledge additional collateral to replace the insurance coverage lost because of the merger.
Section 1060—Availability of Monthly Reports
Section 1065—Handling Collateral Pledged by an Insolvent Depositary
TCMM Treasury Support Center
For information describing acceptable collateral and its valuation, see the TreasuryDirect website.
For information on collateral policy, see the Treasury Collateral Management and Monitoring website.