senate Bill S3161

Establishes the savings bank, savings and loan association or credit union municipal deposit program

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Bill Status


  • Introduced
  • In Committee
  • On Floor Calendar
    • Passed Senate
    • Passed Assembly
  • Delivered to Governor
  • Signed/Vetoed by Governor
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actions

  • 31 / Jan / 2013
    • REFERRED TO LOCAL GOVERNMENT
  • 08 / Jan / 2014
    • REFERRED TO LOCAL GOVERNMENT

Summary

Establishes the savings bank, savings and loan association or credit union municipal deposit program.

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Bill Details

See Assembly Version of this Bill:
A4520
Versions:
S3161
Legislative Cycle:
2013-2014
Current Committee:
Senate Local Government
Law Section:
General Municipal Law
Laws Affected:
Amd §§10 & 11, Gen Muni L; add §454-a, Bank L
Versions Introduced in Previous Legislative Cycles:
2011-2012: S3942, A5045A
2009-2010: A5045, A11538C
2007-2008: A4003

Sponsor Memo

BILL NUMBER:S3161

TITLE OF BILL: An act to amend the general municipal law and the bank-
ing law, in relation to the establishment of a savings bank, savings and
loan association or credit union municipal deposit program, and limiting
deposits of public funds in such institutions to two hundred fifty thou-
sand dollars

PURPOSE: To allow savings banks, savings and loan associations and
federal savings banks to accept deposits from municipalities.

SUMMARY:

Section 1 adds accepting deposits from a local government to the general
powers of a credit union.

Section 2 changes the definition of "bank" to include credit unions, or
federal credit unions, savings banks and savings & loan associations.

Section 3 requires credit unions to pledge assets or furnish other secu-
rity for deposits accepted from local governments, and limits receipt of
municipal deposits to $250,000.

Section 3 also removes restrictions on savings banks from accepting
deposits from a local government.

Section 4 requires savings banks to pledge assets or furnish other secu-
rity for deposits accepted from local governments.

Section 5 requires savings and loan associations to pledge assets or
furnish other security for deposits accepted from local governments.

Section 6 sets forth the effective date of 90 days.

CURRENT LAW: Under current law, only commercial banks and trust compa-
nies are allowed to accept municipal deposits.

JUSTIFICATION: The current law restricting municipal deposits to
commercial banks is an anachronism, stemming from the days when commer-
cial banks were the most secure option for these types of investments.
At that time, savings banks, savings & loan associations and credit
unions, were smaller, less secure entities that primarily served indi-
vidual investors by providing investment opportunities and offering
loans, particularly mortgages to residents of the communities they
served. However, savings banks, savings & loan associations and credit
unions are now on par, with commercial banks in many of the services
they provide as well as the security they offer to their investors,
Allowing savings banks, savings & loans and credit unions to accept
municipal deposits would be beneficial to the communities they are serv-
ing by offering a competitive alternative to commercial banks, who are

often a large corporate entity with no real affiliation or commitment to
the community they serve.

PRIOR LEGISLATIVE HISTORY: S.3942/A.5045-A (2012)

FISCAL IMPLICATIONS: None to the State.

EFFECTIVE DATE: On the 60th day after becoming law.

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                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  3161

                       2013-2014 Regular Sessions

                            I N  S E N A T E

                            January 31, 2013
                               ___________

Introduced  by  Sen. MARTINS -- read twice and ordered printed, and when
  printed to be committed to the Committee on Local Government

AN ACT to amend the general  municipal  law  and  the  banking  law,  in
  relation  to  the  establishment  of  a savings bank, savings and loan
  association or credit union municipal deposit  program,  and  limiting
  deposits  of  public  funds  in such institutions to two hundred fifty
  thousand dollars

  THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section  1.  Paragraph c of subdivision 1 of section 10 of the general
municipal law, as amended by chapter 623 of the laws of 1998, is amended
to read as follows:
  c. "Public deposits" shall mean deposits of public funds  in  a  bank,
SAVINGS  BANK,  SAVINGS  AND  LOAN  ASSOCIATION,  CREDIT UNION, or trust
company which are available for all  uses  generally  permitted  by  the
bank, SAVINGS BANK, SAVINGS AND LOAN ASSOCIATION, CREDIT UNION, or trust
company  to  the  depositing  local  government for actually and finally
collected funds under the bank's, SAVINGS BANK'S, SAVINGS AND LOAN ASSO-
CIATION'S, CREDIT UNION'S, or trust company's account agreement or poli-
cies.
  S 2.  Paragraphs f, g and h of subdivision 1  of  section  10  of  the
general municipal law are relettered paragraphs g, h and i and three new
paragraphs f, j and k are added to read as follows:
  F. "CREDIT UNION" SHALL MEAN A STATE-CHARTERED CREDIT UNION AS DEFINED
BY   SUBDIVISION   NINE   OF  SECTION  TWO  OF  THE  BANKING  LAW  OR  A
FEDERALLY-CHARTERED CREDIT UNION AS DEFINED BY THE FEDERAL CREDIT  UNION
ACT, LOCATED AND AUTHORIZED TO DO BUSINESS IN NEW YORK.
  J.  "SAVINGS BANK" SHALL MEAN A SAVINGS BANK AS DEFINED BY SUBDIVISION
FOUR OF SECTION TWO OF THE BANKING LAW OR ANY FEDERAL SAVINGS BANK.

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD06885-02-3

S. 3161                             2

  K. "SAVINGS AND LOAN ASSOCIATION" SHALL MEAN A SAVINGS AND LOAN  ASSO-
CIATION  AS  DEFINED  BY SUBDIVISION EIGHT OF SECTION TWO OF THE BANKING
LAW OR ANY FEDERAL SAVINGS AND LOAN ASSOCIATION.
  S 3.  Subdivisions 2 and 4 of section 10 of the general municipal law,
as  amended  by chapter 623 of the laws of 1998, paragraph a of subdivi-
sion 2 as amended by chapter 128 of the laws of 2012, and paragraph c of
subdivision 2 and paragraph e of subdivision 4  as  further  amended  by
section  104 of part A of chapter 62 of the laws of 2011, are amended to
read as follows:
  2. a. (i) The governing board of every local government  shall  desig-
nate  one  or  more banks, SAVINGS BANKS, SAVINGS AND LOAN ASSOCIATIONS,
CREDIT UNIONS or trust companies for the deposit of  public  funds,  the
disposition  of  which is not otherwise provided for by law, received by
the chief fiscal officer or any other officer authorized by law to  make
deposits. Such designation shall be by resolution of the governing board
or,  in  the  case  of  a  city, such other body as may be authorized or
required by law to designate depositaries. Such resolution shall specify
the maximum amount which may be kept on deposit at any time in each such
bank, SAVINGS BANK, SAVINGS AND LOAN ASSOCIATION, CREDIT UNION or  trust
company.  Such  designations  and  amounts may be changed at any time by
further resolution.
  (ii) The governing board of a local government that has designated one
or more banks, SAVINGS BANKS,  SAVINGS  AND  LOAN  ASSOCIATIONS,  CREDIT
UNIONS  or  trust  companies for the deposit of public funds pursuant to
subparagraph (i) of this paragraph may, in its discretion, authorize the
designated bank, SAVINGS BANK,  SAVINGS  AND  LOAN  ASSOCIATION,  CREDIT
UNION or trust company to arrange for the redeposit of the local govern-
ment's  funds in one or more banking institutions, as defined in section
nine-r of the banking law, for the  account  of  the  local  government,
through  a  deposit  placement  program  that meets all of the following
conditions:
  (A) On or after  the  date  that  the  local  government's  funds  are
received,  the  designated  bank, SAVINGS BANK, SAVINGS AND LOAN ASSOCI-
ATION, CREDIT UNION or trust company (I) arranges for the  redeposit  of
such funds into deposit accounts in one or more banking institutions and
(II)  serves  as  custodian for the local government with respect to the
funds redeposited into such accounts.
  (B) Local government funds deposited in  a  designated  bank,  SAVINGS
BANK,  SAVINGS  AND  LOAN  ASSOCIATION, CREDIT UNION or trust company in
accordance with this subparagraph  and  held  in  the  designated  bank,
SAVINGS BANK, SAVINGS AND LOAN ASSOCIATION, CREDIT UNION or trust compa-
ny  in  excess  of  the  amount insured by the federal deposit insurance
corporation pending redeposit of the funds pursuant to this subparagraph
shall be secured in accordance with subdivision three of this section.
  (C) The full amount of  local  government  funds  redeposited  by  the
designated  bank,  SAVINGS  BANK,  SAVINGS  AND LOAN ASSOCIATION, CREDIT
UNION or trust company into deposit  accounts  in  banking  institutions
pursuant  to  this subparagraph (plus accrued interest, if any) shall be
insured by the federal deposit insurance corporation.
  (D) At the same time that the money of the local government  is  rede-
posited  pursuant to this subparagraph, the selected depository receives
an amount of deposits from customers  of  other  financial  institutions
pursuant to the deposit placement program that are at least equal to the
amount  of  the  local  government's funds redeposited by the designated
bank, SAVINGS BANK, SAVINGS AND LOAN ASSOCIATION, CREDIT UNION or  trust
company.

S. 3161                             3

  (III)  THE  GOVERNING  BOARD OF EVERY LOCAL GOVERNMENT SHALL FORWARD A
COPY OF SUCH RESOLUTION TO THE OFFICE OF THE STATE COMPTROLLER WHO SHALL
RETAIN SUCH COPY UNTIL SUCH RESOLUTION IS AMENDED OR DISSOLVED.  A  COPY
OF SUCH RESOLUTION SHALL BE RETAINED BY THE STATE COMPTROLLER FOR RECORD
KEEPING PURPOSES ONLY.
  b.  PUBLIC  FUNDS DEPOSITED INTO A SAVINGS BANK, FEDERAL SAVINGS BANK,
CREDIT UNION, FEDERAL CREDIT UNION,  SAVINGS  AND  LOAN  ASSOCIATION  OR
FEDERAL  SAVINGS  AND  LOAN  ASSOCIATION SHALL BE LIMITED TO TWO HUNDRED
FIFTY THOUSAND DOLLARS.
  C. Except as otherwise provided by law, all deposits shall be made  to
the  credit of the local government.  The deposit of public funds pursu-
ant to this subdivision shall release the officer making the deposit and
his or her surety from any liability for loss of such  public  funds  by
reason  of  the  default  or  insolvency of any such bank, SAVINGS BANK,
SAVINGS AND LOAN ASSOCIATION, CREDIT UNION or trust company.
  [c.] D. The governing board of a local government, in which a  banking
development district has been designated by the superintendent of finan-
cial  services  pursuant to section ninety-six-d of the banking law, may
designate a bank,  trust  company  or  national  bank  located  in  such
district  for  the  deposit of public funds, the disposition of which is
not otherwise provided for by law, received by the chief fiscal  officer
or  other  officer  authorized by law to make such deposits. Such desig-
nation shall be by resolution of the governing board or, in the case  of
a  city,  such  other  body  as  may be authorized or required by law to
designate depositories. Such resolution shall specify the maximum amount
which may be kept on deposit at any time with such bank,  trust  company
or  national  bank  located  in  such  district. Subject to an agreement
between such governing board and such banking institution, public  funds
deposited  in  such  banking  institution may earn a fixed interest rate
which is at or below such banking institution's posted two year  certif-
icate  of deposit rate. In those instances where there is such an agree-
ment, its terms and conditions shall also be  specified  in  the  resol-
ution.  Any  such  designation,  amount,  or agreement provisions may be
changed at any time by further resolution.
  4. (a) Notwithstanding any other provision of law to the contrary, the
chief fiscal officer, or other officer authorized by law to make  depos-
its,  may,  subject  to  the  approval  of the governing body of a local
government, by resolution, enter into a contract with a courier  service
for  the  purpose  of  causing  the deposit of public funds with a bank,
SAVINGS BANK, SAVINGS AND LOAN ASSOCIATION, CREDIT UNION or trust compa-
ny as provided in this section.
  (b) The entrusting of public funds for deposit pursuant  to  paragraph
(a)  of this subdivision shall release the officer entrusting the public
funds to the courier service and his or her surety  from  any  liability
for  loss  of such public funds by the courier service in the process of
delivering such public funds  to  the  designated  bank,  SAVINGS  BANK,
SAVINGS AND LOAN ASSOCIATION, CREDIT UNION or trust company.
  (c)  The local government authorizing the deposit of public funds by a
courier service pursuant to paragraph  (a)  of  this  subdivision  shall
require  the courier service to obtain a surety bond for the full amount
entrusted to the courier, payable to the local government  and  executed
by  an  insurance  company  authorized to do business in this state, the
claims paying ability of which is rated in the highest  rating  category
by  at least two nationally recognized statistical rating organizations,
to insure against any loss of public  funds  entrusted  to  the  courier

S. 3161                             4

service  for  deposit or failure to deposit the full amount entrusted to
the courier.
  (d)  A deposit made by a courier on behalf of a local government shall
be deemed to be a deposit made by the  chief  fiscal  officer  or  other
officer entrusting such funds for purposes of the requirements contained
in this section for securing public deposits.
  (e)  A  bank, SAVINGS BANK, SAVINGS AND LOAN ASSOCIATION, CREDIT UNION
or trust company may, from time to time and as agreed upon with a  local
government, reimburse all or part of, but not more than, the actual cost
incurred  by  the  local  government  in  transporting  cash, negotiable
instruments or other items for deposit through a courier service.    Any
such  reimbursement  agreement  shall  apply only to a specified deposit
transaction, and may be subject to such terms,  conditions  and  limita-
tions  as  the  bank, SAVINGS BANK, SAVINGS AND LOAN ASSOCIATION, CREDIT
UNION or trust company deems necessary to  ensure  sound  banking  prac-
tices,  including,  but not limited to, any terms, conditions or limita-
tions that may be required by the department of  financial  services  or
other federal or state authority.
  S  4.  Subdivision  2  of  section 11 of the general municipal law, as
amended by chapter 128 of the laws  of  2012,  is  amended  to  read  as
follows:
  2. a. The governing board of any local government or, if the governing
board  so  delegates,  the  chief fiscal officer or other officer having
custody of the moneys may temporarily invest  moneys  not  required  for
immediate  expenditure,  except moneys the investment of which is other-
wise provided for by law, either: (1) in special  time  INTEREST-BEARING
deposit  accounts  in,  or certificates of deposit OR SHARE CERTIFICATES
issued by, a bank, SAVINGS BANK, SAVINGS AND LOAN ASSOCIATION, OR  SHARE
CERTIFICATES  ISSUED  BY  A  CREDIT  UNION  or trust company located and
authorized to do business in this state; or (2) in accordance  with  all
of the following conditions:
  (i)  the moneys are invested through a bank, SAVINGS BANK, SAVINGS AND
LOAN ASSOCIATION, CREDIT UNION or trust company located  and  authorized
to do business in this state;
  (ii)  the  bank,  SAVINGS  BANK,  SAVINGS AND LOAN ASSOCIATION, CREDIT
UNION or trust company arranges for the deposit of the moneys in certif-
icates of deposit OR SHARE CERTIFICATES in one or  more  banking  insti-
tutions,  as  defined  in  section  nine-r  of  the banking law, for the
account of the local government;
  (iii) the full amount of principal and accrued interest of  each  such
certificate  of  deposit  OR  SHARE  CERTIFICATE  must be insured by the
federal deposit insurance corporation;
  (iv) the bank, SAVINGS BANK,  SAVINGS  AND  LOAN  ASSOCIATION,  CREDIT
UNION  or  trust company acts as custodian for the local government with
respect to such certificates of deposit OR SHARE CERTIFICATES issued for
the local government's account; and
  (v) at the same time that the local government's moneys are  deposited
and the certificates of deposit OR SHARE CERTIFICATES are issued for the
account  of  the  local  government, the bank, SAVINGS BANK, SAVINGS AND
LOAN ASSOCIATION, CREDIT UNION or trust company receives  an  amount  of
deposits  from  customers  of  other  financial institutions equal to or
greater than the amount of the moneys invested by the  local  government
through  the  bank,  SAVINGS  BANK, SAVINGS AND LOAN ASSOCIATION, CREDIT
UNION or trust company.
  b. For any investment made pursuant to paragraph a  of  this  subdivi-
sion,  such  time  INTEREST-BEARING  deposit  account  or certificate of

S. 3161                             5

deposit OR SHARE CERTIFICATE shall be payable within such  time  as  the
proceeds shall be needed to meet expenditures for which such moneys were
obtained  and  provided  further that such time INTEREST-BEARING deposit
account or certificate of deposit OR SHARE CERTIFICATE be secured in the
same  manner  as  is  provided  for securing deposits of public funds by
subdivision three of section ten of this article.
  S 5. The banking law is amended by adding a new section 454-a to  read
as follows:
  S  454-A.  DEPOSITS  OF  PUBLIC MONEY WITH CREDIT UNIONS; SECURITY.  A
CREDIT UNION MAY ACCEPT DEPOSITS OF PUBLIC MONEY SUBJECT TO THE  LIMITA-
TIONS PROVIDED IN SECTION TEN OF THE GENERAL MUNICIPAL LAW.  SUCH CREDIT
UNION SHALL PLEDGE ASSETS OR FURNISH OTHER SECURITY SATISFACTORY IN FORM
AND  AMOUNT  TO  THE  DEPOSITOR, FOR THE REPAYMENT OF MONIES HELD IN THE
NAME OF SUCH DEPOSITOR, WHEN REQUIRED TO BE SECURED BY  APPLICABLE  LAW,
DECREE OR REGULATION.
  S  6.  This  act  shall take effect on the sixtieth day after it shall
have become a law.

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