(a)Every qualified public depository shall maintain on deposit with a custodian, to be held subject to the order of the State Treasurer or the State Treasurer’s designee (which may be a financial institution designated by the State Treasurer), eligible collateral having a market value equal to or in excess of the amount of collateral required under this section.
(b)Each qualified public depository shall be required to pledge collateral, in accordance with procedures established by the board of directors, equal to or exceeding the greater of the following:
(1)The generally applicable pledging requirement; and (2) the applicable percentage of the qualified public depository’s net average daily balance of public deposits established under rules or orders adopted pursuant to subsection (c)
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(a) Every qualified public depository shall maintain on deposit with a custodian, to be held subject to the order of the State Treasurer or the State Treasurer’s designee (which may be a financial institution designated by the State Treasurer), eligible collateral having a market value equal to or in excess of the amount of collateral required under this section.
(b) Each qualified public depository shall be required to pledge collateral, in accordance with procedures established by the board of directors, equal to or exceeding the greater of the following: (1) The generally applicable pledging requirement; and (2) the applicable percentage of the qualified public depository’s net average daily balance of public deposits established under rules or orders adopted pursuant to subsection (c) or subsection (d) below.
(c) The State Treasurer may, from time to time, in his or her discretion require that certain qualified public depositories pledge collateral at levels greater than the generally applicable pledging percentage, including, without limitation, in the case of a qualified public depository with capital accounts which exceed, or constitute an unacceptably high percentage of, the public deposits maintained with the qualified public depository, and in the case of qualified public depositories which the State Treasurer determines may present a higher risk of potential default or insolvency in light of when they commenced operation, recent decrease in capital accounts, recent change in financial condition, and similar matters. The State Treasurer may impose increased collateral-pledging requirements under this subsection pursuant to generally applicable rules and guidelines adopted by the board of directors or by entering orders applicable to individual qualified public depositories in accordance with criteria and conditions approved by the board of directors, or both. In the event the State Treasurer issues an order establishing an increased collateral-pledging level applicable to a particular qualified public depository, the State Treasurer shall promptly notify the affected qualified public depository in writing.
(d) The State Treasurer may impose higher collateral-pledging requirements on a qualified public depository to the extent that the public deposits maintained by the qualified public depository exceed a specified percentage (the “designated concentration level”) established by the board of directors by rule or regulation of the total public deposits held in all qualified public depositories, in which event each affected qualified public depository shall maintain a collateral-pledging level as follows:
(1) With respect to the qualified public depository’s net average daily balance of public deposits that do not exceed the designated concentration level, the collateral-pledging requirement shall be determined under subsections (b) or (c) above, as applicable.
(2) With respect to the qualified public depository’s net average daily balance of public deposits that exceed the designated concentration level, the collateral-pledging requirement shall be the percentage of net average daily balances of public deposits designated by the board.
Determination of whether any qualified public depository maintains collateral in excess of the designated concentration level shall be made by the State Treasurer on the basis of the net average monthly balance of public deposits during the immediately preceding 12-month period.
(e) Deposits of eligible collateral shall be made with a custodian in accordance with procedures established by the State Treasurer, including procedures relating to the execution of documentation to assure that the State Treasurer, on behalf of the Loss Payment Fund, will be able to liquidate collateral deposited by each qualified public depository in the event of a loss to public depositors. Each custodian shall be approved by the State Treasurer in accordance with rules, regulations, or guidelines adopted by the board of directors and the laws of this state.
A qualified public depository may not accept or retain any public deposits which are required to be secured unless it has first deposited eligible collateral equal to or exceeding its required collateral pursuant to this chapter. During any month, a qualified public depository may not accept any public deposit that would increase its net average daily balance of public deposits for that month by 25 percent over the net average daily balance of public deposits for the previously reported month unless it deposits or has on deposit additional required collateral to secure such increase and reports such additional collateral to the State Treasurer prior to the acceptance of such deposit.
(f) Collateral shall be valued in such manner as shall be established in rules or regulations adopted by the board of directors, provided that valuations may not be required more frequently than monthly for any qualified public depositories other than in the case of depositories which are then subject to any suspension, disqualification, or cease and desist order under this chapter. Withdrawals and substitutions of collateral pledged by qualified public depositories shall not be permitted without the approval of the State Treasurer. The State Treasurer shall adopt rules, regulations, or guidelines to permit qualified public depositories to withdraw collateral pledged under this chapter by substituting other eligible collateral of at least equal market value. Any qualified public depository that withdraws or substitutes collateral or custodian that permits withdrawal or substitution of collateral in violation of this chapter shall be subject to the penalties provided in subdivision (3) of subsection (e) of Section 41-14A-7.
(g) A custodian holding collateral under this chapter shall hold such collateral for the benefit of the Loss Payment Fund. The security interest of the Loss Payment Fund in collateral placed with a custodian shall be deemed automatically perfected under the provisions of Articles 8 and 9 of Title 7, as of the date of the acceptance of the deposit of the collateral with the custodian or any subagent of the custodian without the necessity of further action on the part of the Loss Payment Fund. Prior to a default by a qualified public depository and the institution of action by the State Treasurer to enforce the security interest of the Loss Payment Fund under this chapter, the qualified public depository shall not be deemed to have transferred ownership of any pledged collateral to the State Treasurer or the Loss Payment Fund but the qualified public depository’s ownership of the pledged collateral shall be subject to a valid and enforceable lien and security interest in favor of the Loss Payment Fund. Any sale pursuant to the provisions of this chapter by the State Treasurer of any collateral pledged to the Loss Payment Fund shall, when the sale is made and the purchase price paid, have the effect of transferring to and vesting in the purchaser of such sale title to the said bonds or other securities comprising such collateral and as authorizing the said purchaser to have the bonds or other securities so purchased registered in the name of the purchaser or its nominee.