DAR File No. 40603

Money Management Council, Administration

Rule R628-10

Rating Requirements to Be a Permitted Depository

Notice of Proposed Rule

(New Rule)

DAR File No.: 40603
Filed: 07/15/2016 12:30:13 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

The purpose of this rule is to set a uniform standard for public treasurers to evaluate the financial condition of permitted depository institutions so that public funds are not exposed to undue risk. This rule has been in place and expired as Council discussed whether or not it needed to be in place as this type of investment instrument is not utilized. Council decided, as there is still a possibility that a public treasurer could find one of these types of investment products, that the rule should be in place. (Editor's Note: The expiration of Rule R628-10 was published in the May 1, 2016, Bulletin under Filing No. 40303 and was effective 04/12/2016.)

Summary of the rule or change:

This rule provides standards a permitted out-of-state depository must meet to hold Utah public funds.

Statutory or constitutional authorization for this rule:

• Subsection 51-7-18(2)(b)(iv)
• Subsection 51-7-17(4)

Anticipated cost or savings to:

the state budget:

This rule does not affect the state budget because investing in securities is not a budgeted item. If the securities are purchased, there is a return on the investment that follows what the current markets are providing, but these types of instruments are not currently being used.

local governments:

No local governments will be impacted by this rule because these are not a budgeted item; they are an investment. Currently, these types of instruments are not readily available or used.

small businesses:

No small businesses will be impacted by this rule because this rule provides standards for a type of investment. It is not a oversight rule for small businesses.

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

No other persons will be affected by this rule because this rule provides standards for a type of investment. It is not a compliance rule for other persons.

Compliance costs for affected persons:

There will be no compliance costs for this rule as it provides standards for the use of permitted depositories for public entities to use to gauge whether or not the depository may hold Utah public funds.

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

There will be no fiscal impact on any businesses, financial institutions, or any broker/dealer entities. The rule should not have any impact on local government or small businesses. The type of investment products described in the rule is rarely traded in the current market. If the market changes, the guidelines of the rule should allow for reasonable trades and commissions for broker/dealer entities.

Marina Scott, Chair

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

Money Management Council
Administration
Room 180 UTAH STATE CAPITOL COMPLEX
350 N STATE ST
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:

08/31/2016

This rule may become effective on:

09/07/2016

Authorized by:

Marina Scott, Chair

R628. Money Management Council, Administration.

R628-10. Rating Requirements to Be a Permitted Depository.

R628-10-1. Purpose.

This rule establishes a uniform standard for public treasurers to evaluate the financial condition of a Permitted depository institutions to determine if acceptance of Utah public funds by those institutions would expose public treasurers to undo risk. The criteria is applicable to all Permitted depository institutions to determine if they are eligible to accept deposits of Utah public funds. The criteria established by this rule is designed to be flexible enough to ensure that public treasurers will be able to receive competitive market rates on deposits placed outside this state while maintaining sufficient protection from loss.

 

R628-10-2. Authority.

This rule is issued pursuant to Sections 51-7-17(4) and 51-7-18(2)(b)(iv).

 

R628-10-3. Definitions.

The terms used in this rule are defined in Section 51-7-3.

 

R628-10-4. Rating Requirements for Permitted Depositories.

(1) The Permitted depository must meet the following criteria to accept deposits from Utah public entities:

(a) The deposits must be federally insured;

(b) the total assets of the Permitted depository must equal $5 billion or more as of December 31 of the preceding year, and;

(c) fixed rate negotiable deposits which meet the criteria of Section 51-7-11(3)(f) must, at the time of investment, have the equivalent of an "A" or better short term rating by at least two NRSRO's, or:

(d) variable rate negotiable deposits which meet the criteria of Section 51-7-11(3)(m) must, at the time of investment, have the equivalent of an "A" or better, long term rating, by at least two NRSRO's.

(2) Permitted depository institutions whose ratings drop below the minimum ratings established in R628-10-4(1). above, are no longer eligible to accept new deposits of Utah public funds. Outstanding deposits may be held to maturity, but may not be renewed and no additional deposits may be made by any public treasurer.

 

R628-10-5. Restrictions on Concentration of Deposits in Any One Permitted Depository Institution.

The maximum amount of any public treasurers portfolio which can be invested in any one Permitted depository institution shall be as follows:

(1) Portfolios of $10,000,000 or less may not invest more than 10% of the total portfolio with a single issuer.

(2) Portfolios greater than $10,000,000 but less than $20,000,000 may not invest more than $1,000,000 in a single issuer.

(3) Portfolios of $20,000,000 or more may not invest more than 5% of the total portfolio with a single issuer.

The amount or percentages used in determining the amount of Permitted deposits a treasurer may purchase, shall be determined by the book value of the portfolio at the time of purchase.

 

KEY: public investments, banking law, depository, professional competency

Date of Enactment or Last Substantive Amendment: 2016

Authorizing, and Implemented or Interpreted Law: 51-7-17(3); 51-7-18(2)(b)