2023 Connecticut General Statutes › Title 36a - The Banking Law of Connecticut › Chapter 665a - Deposits › Section 36a-333. (Formerly Sec. 36-386). - Collateral requirements.

(a)(1) To secure public deposits, each qualified public depository that is not under a formal regulatory order shall at all times maintain, segregated from its other assets as provided in subsection (b) of this section, eligible collateral in an amount not less than twenty-five per cent of all uninsured public deposits held by the depository, provided if such depository is: (A) (i) A bank or out-of-state bank having a tier one leverage ratio of not less than six per cent and a risk-based capital ratio of not less than twelve per cent, (ii) a bank or out-of-state bank having elected to use the community bank leverage ratio framework pursuant to 12 CFR 324.12, as amended from time to time, and having a tier one leverage ratio greater than nine per cent, or (iii) a credit union or federal credit union having a net worth ratio of not less than eight per cent, the amount of eligible collateral shall be a sum not less than ten per cent of all uninsured deposits held by the depository; or (B) (i) a bank or out-of-state bank having a tier one leverage ratio of less than five per cent or a risk-based capital ratio of less than ten per cent, or (ii) a credit union or federal credit union having a net worth ratio of less than seven per cent, the amount of eligible collateral shall be not less than a sum equal to one hundred ten per cent of all uninsured public deposits held by the depository.
(2) Notwithstanding the provisions of subdivisions (1) and (3) of this subsection, to secure public deposits, each qualified public depository that (A) has been conducting business in this state for a period of less than two years, except for a depository that is a successor institution to a depository which conducted business in this state for two years or more, or (B) is an uninsured bank, shall at all times maintain, segregated from its other assets as required under subsection (b) of this section, eligible collateral in an amount not less than one hundred twenty per cent of all uninsured public deposits held by the depository.
(3) To secure public deposits, each qualified public depository that is under a formal regulatory order shall at all times maintain, segregated from its other assets as required under subsection (b) of this section, eligible collateral in an amount not less than one hundred ten per cent of all uninsured public deposits held by the depository. However, if such regulatory order is not related to capital, asset quality, earnings or liquidity, the depository notifies each of its public depositors of the issuance of such order and such depository is (A) a bank or out-of-state bank having a tier one leverage ratio of not less than five per cent and a risk-based capital ratio of not less than ten per cent, or (B) a credit union or federal credit union having a net worth ratio of not less than seven per cent, such depository may reduce the amount of eligible collateral it is required to maintain under this subdivision to an amount not less than seventy-five per cent of all uninsured public deposits held by the depository, provided if such depository is (i) a bank or out-of-state bank having a tier one leverage ratio of not less than seven and one-half per cent and a risk-based capital ratio of not less than fourteen per cent, (ii) a bank or out-of-state bank having elected to use the community bank leverage ratio framework pursuant to 12 CFR 324.12, as amended from time to time, and having a tier one leverage ratio greater than nine per cent, or (iii) a credit union or federal credit union having a net worth ratio of not less than nine and one-half per cent, the amount of eligible collateral may be reduced to a sum not less than fifty per cent of all uninsured public deposits held by the depository.
(4) Notwithstanding the provisions of this subsection, the qualified public depository and the public depositor may agree on an amount of eligible collateral to be maintained by the depository that is greater than the minimum amounts required under subdivision (1) or (3) of this subsection, as applicable. For purposes of this subsection, the amount of all uninsured public deposits held by the depository shall be determined at the close of business on the day of receipt of any public deposit and any deficiency in the amount of eligible collateral required under this section shall be cured not later than the close of business on the following business day. For purposes of this subsection, the depository's tier one leverage ratio and risk-based capital ratio or net worth ratio shall be determined, in accordance with applicable federal regulations and regulations adopted by the commissioner in accordance with chapter 54, based on the most recent quarterly call report, provided if, during any calendar quarter after the issuance of such report, the depository experiences a decline in its tier one leverage ratio, risk-based capital ratio or net worth ratio to a level that would require the depository to maintain a higher amount of eligible collateral under subdivision (1) or (3) of this subsection, the depository shall increase the amount of eligible collateral maintained by it to the minimum required under subdivision (1) or (3) of this subsection, as applicable, based on such lower tier one leverage ratio, risk-based capital ratio or net worth ratio and shall notify the commissioner of its actions. The commissioner may, at any time, require the depository to increase its eligible collateral to an amount greater than that required by subdivision (1) or (3) of this subsection, as applicable, up to a maximum amount of one hundred twenty per cent, if the commissioner reasonably determines that such increase is necessary for the protection of public deposits. If the commissioner determines that such increase in eligible collateral is no longer necessary for the protection of public deposits, the commissioner may allow the depository to adjust the amount downward, as the circumstances warrant, to an amount not less than the minimum amount required by subdivision (1) or (3) of this subsection, as applicable.
(5) For purposes of this subsection, “formal regulatory order” means a written agreement related to enforcement, including a letter of understanding or agreement or a written order, that a supervisory agency is required to publish or publishes on its web site, but does not include any written agreement or written order under which the sole obligation of the depository is to pay a civil money penalty, fine or restitution.
(b) (1) Each qualified public depository that is a bank or out-of-state bank (A) having a tier one leverage ratio of five per cent or greater and a risk-based capital ratio of ten per cent or greater, or (B) having elected to use the community bank leverage ratio framework pursuant to 12 CFR 324.12, as amended from time to time, and having a tier one leverage ratio greater than nine per cent shall transfer eligible collateral maintained under subsection (a) of this section to its own trust department, provided such trust department is located in this state unless the commissioner approves otherwise, to the trust department of another financial institution, provided such eligible collateral shall be maintained in such other financial institution's trust department located in this state unless the commissioner approves otherwise, or to a federal reserve bank or federal home loan bank. Each qualified public depository that is (i) a bank or out-of-state bank having a tier one leverage ratio of less than five per cent or a risk-based capital ratio of less than ten per cent, (ii) a bank or out-of-state bank having elected to use the community bank leverage ratio framework pursuant to 12 CFR 324.12, as amended from time to time, and having a tier one leverage ratio of nine per cent or less, or (iii) a credit union or federal credit union shall transfer eligible collateral maintained under subsection (a) of this section to the trust department of a financial institution that is not owned or controlled by the depository or by a holding company owning or controlling the depository, provided such eligible collateral shall be maintained in such other financial institution's trust department located in this state unless the commissioner approves otherwise, or to a federal reserve bank or federal home loan bank. Such transfers of eligible collateral shall be made in a manner prescribed by the commissioner. The qualified public depository shall determine and adjust the market value of such eligible collateral on a monthly basis. Without the requirement of any further action, the commissioner shall have, for the benefit of public depositors, a perfected security interest in all such eligible collateral held in such segregated trust accounts. Such security interest shall have priority over all other perfected security interests and liens. The commissioner may, at any time, require the depository to value the collateral more frequently than monthly if the commissioner reasonably determines that such valuation is necessary for the protection of public deposits. Each holder of eligible collateral shall file with the commissioner, at the end of each calendar quarter, a report with the CUSIP number, description and par value of each investment it holds as eligible collateral.
(2) No qualified public depository shall maintain eligible collateral in its own trust department pursuant to subdivision (1) of this subsection unless such depository is authorized under law to exercise fiduciary powers in this state.
(3) No financial institution shall accept a transfer of eligible collateral from a qualified public depository pursuant to subdivision (1) of this subsection unless such financial institution is (A) authorized under law to exercise fiduciary powers in this state, and (B) federally insured or receives approval of the commissioner. If a financial institution ceases to meet such requirements, it shall give immediate notice to the qualified public depository and the commissioner who shall thereupon instruct such institution with respect to the disposition of eligible collateral.
(4) Each qualified public depository shall enter into a written trust agreement with the financial institution, federal reserve bank or federal home loan bank serving as trustee. Such agreement shall include a statement by the financial institution that such institution shall be subject to and comply with the applicable requirements of sections 36a-330 to 36a-338, inclusive.
(c) The depository shall have the right to make substitutions of eligible collateral at any time without notice. The depository shall have the right to reduce the amount of eligible collateral maintained by it that is in excess of the amount required under subsection (a) of this section. The income from the assets which constitute segregated eligible collateral shall belong to the depository without restriction.
(d) Any qualified public depository that ceases to be a qualified public depository or no longer wishes to be a qualified public depository shall no longer receive public deposits and shall give immediate notice to the commissioner, who shall thereupon instruct such qualified public depository of the procedures to be followed with respect to the return of public deposits and eligible collateral.
(1967, P.A. 517, S. 5; P.A. 77-614, S. 156, 587, 610; P.A. 78-303, S. 85, 136; P.A. 87-9, S. 2, 3; P.A. 91-245, S. 4; P.A. 94-122, S. 158, 340; P.A. 95-155, S. 23, 29; P.A. 03-196, S. 9; P.A. 04-136, S. 34; P.A. 05-39, S. 7; P.A. 06-10, S. 5; P.A. 11-50, S. 9; P.A. 12-96, S. 37–39; P.A. 13-135, S. 14; P.A. 14-187, S. 49, 50; P.A. 16-65, S. 3; P.A. 21-138, S. 2.)
History: P.A. 77-614 and P.A. 78-303 allowed substitution of banking commissioner references for references to Public Deposit Protection Commission, effective January 1, 1979; (Revisor's note: Pursuant to P.A. 87-9 “banking commissioner” was changed editorially by the Revisors to “commissioner of banking”); P.A. 91-245 deleted existing Subsecs. (a) and (b), added new Subsec. (a) re eligible collateral requirements, added new Subsec. (b) re segregation of eligible collateral, added notice requirements to Subsec. (c), made a technical change to Subsec. (d) and added Subsec. (e) re minimum market value for eligible collateral; P.A. 94-122 made technical changes, effective January 1, 1995; Sec. 36-386 transferred to Sec. 36a-333 in 1995; P.A. 95-155 added provisos in Subsec. (b) re location of the trust department and location at which eligible collateral is maintained, effective June 27, 1995; P.A. 03-196 added Subsecs. (a)(5) re collateral requirement for uninsured bank and (a)(6) re collateral requirement for depository that is subject to order to cease and desist, or has entered into a stipulation and agreement, or a letter of understanding and agreement with a bank or credit union supervisor, effective July 1, 2003; P.A. 04-136 amended Subsec. (a)(5) to delete reference to Sec. 36a-70(t)(1), effective May 12, 2004; P.A. 05-39 amended Subsec. (a) to provide that amount of all public deposits held by the qualified public depository shall be determined based on amount of public deposits reported on most recent written report filed with commissioner pursuant to Sec. 36a-338, in lieu of amount reported on most recent quarterly call report, effective May 17, 2005; P.A. 06-10 amended Subsec. (c) to provide that depository has authority to reduce amount of eligible collateral maintained under Subsec. (a) provided such reduction is determined based on amount of all public deposits held by depository and its risk-based capital ratio, effective May 2, 2006; P.A. 11-50 amended Subsec. (a) to add provisions re consent order, preliminary warning letter and memorandum of understanding and to replace provision re determining amount of all public deposits based on either deposits reported on most recent written report or average of deposits reported with provision re determining amount of all public deposits at close of business on day deposits are received, effective June 13, 2011; P.A. 12-96 amended Subsec. (a) by adding references to “uninsured” re public deposits, requirements re qualified public depository that satisfies requirements of Subsec. (f), references to “subdivision (6)” and provisions re determining minimum market value of eligible collateral and by making conforming changes, amended Subsec. (c) to add “uninsured” re public deposits and added Subsec. (f) re qualified public depository subject to cease and desist order, consent order or preliminary warning letter or that has entered into a stipulation and agreement, memorandum of understanding or letter of understanding and agreement, effective June 8, 2012; P.A. 13-135 amended Subsec. (a) by replacing introductory language and former Subdivs. (1) to (6) with new Subdivs. (1) to (3) re eligible collateral requirements, redesignating remaining provisions as new Subdiv. (4) and amending same to add references to tier one leverage ratio and net worth ratio, delete former Subpara. (B) re increase in eligible collateral, add provisions re authority of commissioner to increase eligible collateral up to a maximum amount of 120 per cent, add new Subdiv. (5) defining “formal regulatory order”, and make technical changes, amended Subsec. (b) by limiting provisions to qualified public depository that is a bank or out-of-state bank having a tier one leverage ratio of 5 per cent or greater or a risk-based capital ratio of 10 per cent or greater, requiring qualified public depository that is a credit union or federal credit union to transfer eligible collateral to the trust department of certain financial institutions, deleting requirement that eligible collateral be valued at market value or as determined by commissioner on a quarterly basis, adding requirement that qualified public depository determine and adjust market value on a monthly basis, and adding provision permitting commissioner to require depository to value collateral more frequently than monthly, amended Subsec. (c) by permitting depository to reduce the amount of eligible collateral that is in excess of the amount required under Subsec. (a), deleting proviso that required reduction to be determined based on the amount of all uninsured public deposits and deleting requirement that depository provide written notice to depositors of reduction, deleted Subsec. (d) designator and incorporated provisions of Subsec. (d) into Subsec. (c), and deleted former Subsecs. (e) and (f), effective June 18, 2013; P.A. 14-187 amended Subsec. (b) by designating existing provisions as Subdiv. (1) and adding Subdivs. (2) to (4) re maintaining eligible collateral in depository's trust department, accepting transfer of eligible collateral and written trust agreement, and added Subsec. (d) re cessation of being a qualified public depository, effective June 11, 2014; P.A. 16-65 amended Subsec. (b)(1) by deleting provision re security interest granted pursuant to and in accordance with agreement between the public depositor and the qualified public depository, effective May 26, 2016; P.A. 21-138 amended Subsec. (a)(1)(A) by adding clause designators (i) to (iii) and by adding provision in Subpara. (A)(ii) re banks and out-of-state banks having elected to use community bank leverage ratio framework, amended Subsec. (a)(1)(B) by adding clause designators (i) and (ii), amended Subsec. (a)(3) by adding Subpara. designators (A) and (B), adding clause designators (i) to (iii) in Subpara. (B), and adding provision in Subpara. (B)(ii) re banks and out-of-state banks having elected to use community bank leverage ratio framework, amended Subsec. (b)(1) by adding Subpara. designator (A) and changing “or” to “and” therein, adding Subpara. (B) re election to use community bank leverage ratio framework, adding clause designators (i) to (iii) in Subpara. (B) and adding provision in Subpara. (B)(ii) re a bank or out-of-state bank having elected to use the community bank leverage ratio framework, and making technical and conforming changes.