For better or worse, State and Federal laws are constantly changing regarding the banking environment. Occasionally, some changes will go under the radar. In this article, we recap the WV Senate Bill 438 changes and what you can expect. Senate Bill 438 is an act to amend and reenact §12-1-5 of the Code of West Virginia and to amend the Code by adding Article 12-1B, otherwise known as the West Virginia Security for Public Deposits Act (the Act). The Act will ultimately impact all designated state depositories that hold public fund deposits. A published list of designated state depositories is listed on the West Virginia State Treasurer’s website at the bottom of the Banking Services tab. Legislative Intent The purpose of the Act is to allow designated state depositories to pledge collateral for all public deposits through a pooled method and Public Deposits Program. The West Virginia Legislature intends that designated state depositories participating in the Public Deposits Program will be authorized to secure public deposits through the pooled method as an alternative to forms of securing public deposits charged under other sections of the Code of West Virginia. The West Virginia Legislature anticipates that authorizing designated state depositories to secure public deposits via the pooled method will lower the overall cost of public deposits and make public banking contracts in West Virginia more desirable to financial institutions. Collateralization of Public Funds Going forward, the following methods will be allowed for collateralizing public deposits: the Dedicated Single Bank Method and the Multibank Pooled Method. The Dedicated Single Bank Method is securing public deposits without accepting the contingent liability for the losses of public deposits of other designated state depositories as provided in §12-1-5. This method includes: • A 102% collateral pledge for all public deposits over the FDIC, IntraFi/CDARS/ICS coverage amounts • A weekly reporting of public deposits through the State Treasurer’s Office Online Collateral System • No liability for losses of public deposits held by other public depositories The Multibank Pooled Method is the securing of public deposits by accepting the contingent liability for the losses of public deposits of other designated state depositories that choose this method. This method includes: • Collateral pledging levels of 50%, 75% or 100% will be determined by nationally recognized financial rating West Virginia Security for Public Deposits Program By Josh Sharp, Suttle & Stalnaker 12 West Virginia Banker
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