Money Management Council, Administration

Rule R628-11

Maximum Amount of Uninsured Public Funds Allowed to Be Held by Any Qualified Depository

Notice of Proposed Rule

(Amendment)

DAR File No.: 33359
Filed: 02/01/2010 12:40:03 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

The purpose of these changes is to bring the levels of Tier One capital in line with federal definitions and to clarify when the Council may request collateral or drop an allotment to zero when making adjustments to uninsured public funds allotments based on material changes in depositories financial conditions or formal enforcement actions.

Summary of the rule or change:

The rule uses a ratio of Tier One capital to total assets to base the uninsured public funds allotment calculation on. The Council changed the bottom percentage to bring it into line with federal criteria which states that a financial institution with a Tier One capital ratio below 4% is undercapitalized. Based on this definition the Council raised the percentage in the lowest category from 3.5% to 4%. Language was also added to allow the Council to drop an allotment to zero if a qualified depository comes under a formal enforcement action and the depository does not have collateral available to cover uninsured public funds. The Council may also ask for collateral if the institution does not provide information regarding their financial status in a timely manner.

State statutory or constitutional authorization for this rule:

• Section 51-7-18.1

Anticipated cost or savings to:

the state budget:

There may be additional actions taken by the Council with regards to various financial institutions that are under-capitalized. However, the actions will most likely be infrequent enough to carry negligible increased costs which the Council will simply absorb.

local governments:

This change in the rule does not require local governments to implement changes.

small businesses:

This rule does not govern small businesses.

persons other than small businesses, businesses, or local governmental entities:

There are no new fees added that would cost any other organization to comply with this change.

Compliance costs for affected persons:

There are no new fees added that would affect any other persons.

Comments by the department head on the fiscal impact the rule may have on businesses:

There is no fiscal impact on businesses.

William W. Wallace, Chair

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Money Management Council
Administration
350 N STATE ST
STE 180
SALT LAKE CITY, UT 84114

Direct questions regarding this rule to:

• Ann Pedroza at the above address, by phone at 801-538-1883, by FAX at 801-538-1465, or by Internet E-mail at [email protected]

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

03/17/2010

This rule may become effective on:

03/24/2010

Authorized by:

William Wallace, Chair

R628. Money Management Council, Administration.

R628-11. Maximum Amount of Uninsured Public Funds Allowed to Be Held by Any Qualified Depository.

R628-11-5. General Rule.

A. Maximum Insured Public Funds

Any qualified depository may accept, receive, and hold deposits of public funds without limitation, if the total amount of deposits from each public treasurer does not exceed the applicable federal depository insurance limit.

B. Maximum Deposits in Excess of the Federal Insurance Limits For Qualified Utah Depository Institutions

(1) For all qualified Utah depository institutions which receive a qualified opinion issued by an independent certified public accountant upon completion of an annual audit performed in accordance with generally accepted auditing standards, and for all qualified Utah depository institutions which do not have an audit conducted by an independent certified public accountant, the maximum amount of uninsured public funds which may be held shall be according to the following schedule:

 

TABLE 1

 Ratio of Tier one Capital    Uninsured Public

 to Total Assets              Funds Allotment



 5.0% or more                 One    X    Capital

 [3.5%]4.00% to 4.99%                .5     X    Capital

 Less than [3.5%]4.00%               None

 

(2) A qualified Utah depository institution which receives an unqualified opinion issued by an independent certified public accountant upon completion of an annual audit performed in accordance with generally accepted auditing standards, may submit the audit report within 100 days of the date of the audit to the Department of Financial Institutions for review and the Commissioner of Financial Institutions must authorize that the ratios of Tier one capital to total assets applicable to the institution submitting the audit for determining the maximum amount of uninsured public funds allowed may be according to the following schedule:

 

TABLE 2

 Ratio of Tier one Capital    Uninsured Public

 to Total Assets              Funds Allotment



 5% or more                   1.5     X    Capital

 [3.5%]4.00% to 4.99%                 .75    X    Capital

 Less than [3.5%]4.00%               None

 

C. A qualified out-of-state depository institution will be treated as a qualified Utah depository subject to all the provisions of this section in determining its uninsured public funds allotment except that the uninsured public funds allotment will be reduced by multiplying by a factor of total deposits outstanding at Utah branches of the institution divided by the total deposits at the institution. Nothing in R628-11 shall prohibit a n out-of-state depository institution from qualifying as a permitted out-of-state depository in accordance with R628-10.

 

R628-11-8. Frequency of Adjustment to the Uninsured Public Funds Allotment.

A. The uninsured public funds allotment for each qualified depository shall be established quarterly by the Council, based on the reports of condition filed with the Commissioner as of the close of the preceding quarter. The uninsured public funds allotments shall be established in accordance with the following:

 

TABLE 3

     Report of Condition       Effective Date

     As Of:                    of Allotment



     December    31            April     1

     March       31            July      1

     June        30            October   1

     September   30            January   1

 

B. The Money Management Council may make interim adjustments in a qualified depository's uninsured public funds allotment if material changes in a qualified depository's financial condition have occurred or if there is a formal enforcement action by the federal or state regulator. These interim adjustments may include but are not limited to reducing a qualified depository's uninsured public funds allotment to zero if there is not sufficient collateral to cover uninsured public funds.

C. Any qualified depository that becomes subject to a formal enforcement action by any federal regulator shall notify the Council within twenty-four hours of the publication of the action taken by a federal regulator. Failure of a qualified depository to comply with this requirement to notify the Council may result in action taken by the Council to require collateralization of uninsured public funds in accordance with Section 51-7-18.1(5) and Section R628-11-7.

 

KEY: financial institutions, banking law

Date of Enactment or Last Substantive Amendment: [March 22, 2005]2010

Notice of Continuation: October 12, 2005

Authorizing, and Implemented or Interpreted Law: 51-7-18.1(2)