Court Opinion

ID: 3464772
Source: CourtListenerOpinion
Date Created: 2016-07-05 20:29:29.311114+00
Date Added: 2024-06-11T14:04:34.525431
License: Public Domain

Dear Ms. Singletary:
You have requested an opinion of the Attorney General relative to an interpretation of Act 509 of the 1993 Regular Session of the Louisiana Legislature which became effective April 1, 1994. In connection therewith, you state that Southeastern Louisiana University (Southeastern) currently has a fiscal agent agreement with Community State Bank of Hammond (Community).  This agreement expires on December 31, 1994, and states that Southeastern is to deposit its demand deposits in this bank, with the other participating banks to get their pro rata share. Under the agreement, Community is considered the fiscal agent bank.
You further state that, at this time, Community has an unsatisfactory Community Reinvestment Act (CRA) Rating.  A representative of Community has advised you that corrective action has been taken and a follow-up visit could occur at any time. However, Community cannot call and request the visit as of a given date.
You specifically ask whether Southeastern should remove its funds from Community in light of its unsatisfactory CRA Rating.
In answer to your question I refer you to the provisions of Act No. 509, which amends and reenacts R.S. 49:317 and enacts R.S.6:124.1(C) and 39:1220(A)(4).
R.S. 6:124.1(C) provides, in pertinent part:
     "C.  (1)  A financial institution shall not receive public funds for deposit if that institution fails to maintain a rating of satisfactory or outstanding under the Community Reinvestment Act of 1977,  12 U.S.C. § 2901 et seq.
     (2)  If a financial institution acts as a depository of state funds and fails to maintain a rating of satisfactory or outstanding under the Community Reinvestment Act of 1977, the institution may continue to hold the public funds until maturity to avoid the imposition of a penalty upon the depositor, however, the institution shall not accept the public funds for reinvestment and shall not accept additional public funds."
R.S. 49:317, as amended, provides, in pertinent part, the following:
     "The Interim Emergency Board shall designate as state depositories such national or state banks or trust companies, doing business in this state as it may deem advisable after considering the recommendations of the treasurer.  No bank shall be designated as a state depository unless it maintains a rating of satisfactory or outstanding under the Community Reinvestment Act of 1977,  12 U.S.C. § 2901 et seq."
It is clear from the above provisions that if a bank which has been designated a state depository fails to maintain a satisfactory CRA Rating, it may no longer receive and/or hold public funds.  In the event public funds have been invested and the withdrawal of same would result in the imposition of a penalty, they may be held until maturity, at which time they cannot be reinvested.  Investments for which no penalty may be imposed for early withdrawal must, like demand deposits, be immediately divested.
It is my understanding that legislation has been introduced in the Third Extraordinary Session of the 1994 Louisiana Legislature to amend the provisions enacted by Act 509 of 1993. If passed, this legislation could affect the opinion expressed herein.
Trusting this adequately responds to your inquiry, I am
Yours very truly,
                           RICHARD P. IEYOUB Attorney General
BY: ROBERT E. HARROUN, III Assistant Attorney General RPI/Rob3/bb 0343R