General Assembly: 78 (1999 Regular GA) - Chapter 117 - Deposit of public funds — depository standards


Published: 1999-05-11

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207 LAWS OF THE SEVENTY-EIGHTH G.A., 1999 SESSION

CHAPTER 117 DEPOSIT OF PUBLIC FUNDS- DEPOSITORY STANDARDS

H.F. 571

CH.117

AN ACT relating to the deposit of public funds and the conditions which must be met by a savings and loan association or savings bank to be eligible to receive such deposits, and providing an effective date.

Be It Enacted by the General Assembly of the State of Iowa:

Section 1. Section 12C.1, subsection 2, paragraph c, Code 1999, is amended to read as follows:

c. "Bank" means a corporation engaged in the business of banking authorized by law to receive deposits and whose deposits are insured by the bank insurance fund of the federal deposit insurance corporation and includes any office of a bank. "Bank" also means a savings and loan or savings association.

Sec. 2. Section 12C.1, subsection 2, paragraph f, Code 1999, is amended to read as follows:

f. "Financial institution" means a bank, savings and loan, or a credit union.

Sec. 3. Section 12C.1, subsection 3, paragraph a, Code 1999, is amended to read as follows:

a. If a depository is a savings and loan oF a credit union, then public deposits in the sa-vings and loan oF credit union shall be secured pursuant to sections 12C.16 through 12C.19 and sections 12C.23 and 12C.24.

Sec. 4. Section 12C.1, subsection 3, paragraph b, Code 1999, is amended to read as follows:

b. If a depository is a bank, theft public deposits in the bank shall be secured pursuant to sections 12C.21, 12C.23, and 12C.24.*

Sec. 5. Section 12C.6A, subsection 5, paragraphs a, b, and c, Code 1999, are amended to read as follows:

a. A person who believes a bank, savings and loan assoeiation, OF sa>rings banh: has failed to meet its community reinvestment responsibility may file a complaint with the committee detailing the basis for that belief.

b. If any committee member, in the member's discretion, finds that the complaint has merit, the member may order the bank, savings and loan assoeiation, OF sa>rings banlE alleged to have failed to meet its community reinvestment responsibility to attend and par- ticipate in a meeting with the complainant. The committee member may specify who, at minimum, shall represent the financial institution at the meeting. At the meeting, or at any other time, the finaneial institution bank may, but is not required to, enter into an agreement with a complainant to correct alleged failings.

c. A majority of the committee may order a bank, s&"rings and loan assoeiation, oF sav ings banlE, against which a complaint has been filed pursuant to this subsection, to disclose such additional information relating to community reinvestment as required by the order of the majority of the committee.

Sec. 6. Section 12C.15, Code 1999, is amended to read as follows: 12C.15 RESTRICTION ON REQUIRING COLlATERAL. A local government shall not require a pledge of collateral for that portion of the local

government's deposits in a sa>1ings and loan OF credit union that is covered by insurance of a federal agency or instrumentality.

• See chapter 208, §42 herein

CH. 117 LAWS OF THE SEVENTY-EIGHTH G.A., 1999 SESSION

Sec. 7. Section 12C.l6, Code 1999, is amended to read as follows: 12C.l6 SECURITY FOR DEPOSIT OF PUBLIC FUNDS.

208

1. Before a deposit of public funds is made by a public officer with a sa-vings and loan OF credit union in excess of the amount federally insured, the public officer shall obtain secu- rity for the deposit by one or more of the following:

a. The sa-Yings and loan OF credit union may give to the public officer a corporate surety bond of a surety corporation approved by the treasury department of the United States and authorized to do business in this state, which bond shall be in an amount equal to the public funds on deposit at any time. The bond shall be conditioned that the deposit shall be paid promptly on the order of the public officer making the deposit and shall be approved by the officer making the deposit.

b. The sa-vings and loan oF credit union may deposit, maintain, pledge and assign for the benefit of the public officer in the manner provided in this chapter, securities approved by the public officer, the market value of which is not less than one hundred ten percent of the total deposits of public funds placed by that public officer in the sa-vings and loan OF credit union. The securities shall consist of any of the following:

(1) Direct obligations of, or obligations that are insured or fully guaranteed as to princi- pal and interest by, the United States of America or an agency or instrumentality of the United States of America.

(2) Public bonds or obligations of this state or a political subdivision of this state. (3) Public bonds or obligations of another state or a political subdivision of another state

whose bonds are rated within the two highest classifications of prime as established by at least one of the standard rating services approved by the superintendent of banking pursu- ant to chapter 17 A.

(4) To the extent of the guarantee, loans, obligations, or nontransferable letters of credit upon which the payment of principal and interest is fully secured or guaranteed by the United States of America or an agency or instrumentality of the United States of America or the U.S. central credit union, and the rating of the U.S. central credit union remains within the two highest classifications of prime established by at least one of the standard rating services approved by the superintendent of banking by rule pursuant to chapter 17 A. The treasurer of state shall adopt rules pursuant to chapter 17 A to implement this section.

(5) First lien mortgages which are valued according to practices acceptable to the trea- surer of state.

(6) Investments in an open-end management investment company registered with the federal securities and exchange commission under the federal Investment Company Act of 1940, 15 U.S.C. § 80(a), which is operated in accordance with 17 C.F.R. § 270.2a-7.

Direct obligations of, or obligations that are insured or fully guaranteed as to principal and interest by, the United States of America, which may be used to secure the deposit of public funds under subparagraph (1), include investments in an investment company or investment trust registered under the federal Investment Company Act of 1940, 15 U.S.C. § 80a, the portfolio of which is limited to the United States government obligations de- scribed in subparagraph (1) and to repurchase agreements fully collateralized by the United States government obligations described in subparagraph (1), if the investment company or investment trust takes delivery of the collateral either directly or through an authorized custodian.

2. If public funds are secured by both the assets of a savings and loan oF credit union and a bond of a surety company, the assets and bond shall be held as security for a rateable proportion of the deposit on the basis of the market value of the assets and of the total amount of the surety bonds.

Sec. 8. Section 12C.l7, Code 1999, is amended to read as follows: 12C.l7 DEPOSIT OF SECURITIES. 1. A sa-vings and loan oF credit union which receives public funds shall pledge securities

owned by it as required by this chapter in one of the following methods:

209 LAWS OF THE SEVENTY-EIGHTH G.A., 1999 SESSION CH.ll7

a. The securities shall be deposited with the county, city, or other public officers at the option of the officers.

b. The securities shall be deposited pursuant to a bailment agreement with a financial institution having facilities for the safekeeping of securities and doing business in the state. A financial institution which receives securities for safekeeping is liable to the public officer to whom the securities are pledged for any loss suffered by the public officer if the financial institution relinquishes custody of the securities contrary to the provisions of this chapter or the instrument governing the pledge of the securities.

c. The securities shall be deposited with the federal reserve bank of Chieago, Illinois, the federal home loan bank of Des Moines, Iowa, or the U.S. central credit union pursuant to a bailment agreement or a pledge custody agreement.

d. The securities may be deposited by any combination of methods specified in para- graphs "a", "b", and "c".

2. A deposit of securities shall not be made in a facility owned or controlled directly or indirectly by the financial institution which deposits the securities.

3. All deposits of securities, other than deposits of securities with the appropriate public officer, shall have a joint custody receipt taken for the securities with one copy delivered to the public officer and one copy delivered to the SEYtings and loan or credit union. A sa-vings and loan or credit union pledging securities with a public officer may cause the securities to be examined in the officer's office to show the securities are placed with the officer as collateral security and are not transferable except upon the conditions provided in this chapter.

4. Upon written request from the appropriate public officer but not less than ql:larterly, a sEYtings and loan or eredit l:lRiOR monthly. the federal home loan bank of Des Moines. Iowa. or the U.S. central credit union. shall report a description. the par value and the market value of any pledged collateral and the total deposits of pl:lblie funds of that offieer iR the savings and loan or~ credit union.

Sec. 9. Section 12C. 18, Code 1999, is amended to read as follows: 12C.18 CONDITION OF SECURITY. The condition of the surety bond or the deposit of securities, instruments, or a joint cus-

tody receipt, must be that the sayings and loan or credit union will promptly pay to the parties entitled public funds, including any interest on the funds, in its custody upon lawful demand and, when required by law, pay the funds to the public officer who made the deposit.

Sec. 10. Section 12C.19, subsections 3 and 4, Code 1999, are amended to read as follows: 3. In the event of substitution. addition. or exchange of securities, the holder or custodian

of the securities shall, on the same day, forward by eertified mail, retl:lFR reeeipt reql:lested, regular mail to the public officer and the sEYtings and loan or credit union, a receipt specifi- cally describing and identifying both the substituted or additional securities and those released and retl:lrRed to the savings and loan or eredit l:lRion.

4. The public officer which deposits public funds with a SEYtings and loan or credit union shall require, if the market value of the securities deposited with or for the benefit of the officer falls below one hundred ten percent of the deposit liability to the public officer, the deposit of additional security to bring the total market value of the security to one hundred ten percent of the amount of public funds held by the savings and loan or credit union.

Sec. 11. Section 12C.23, Code 1999, is amended to read as follows: 12C.23 PAYMENT OF LOSSES IN A CREDIT UNION. 1. The pledging of securities by a depository credit union pursuant to this chapter consti-

tutes consent by the depository credit union to the disposition of the securities in accordance with this section.

The acceptance of public funds by a depository credit union pursuant to this chapter constitutes consent by the depository credit union to assessments by the treasurer of state in accordance with this chapter.

CH.ll7 LAWS OF THE SEVENTY-EIGHTH G.A., 1999 SESSION 210

2. The depository credit union and the security given for the public funds in its hands are liable for payment if the depository credit union fails to pay a check, draft, or warrant drawn by the public officer or to account for a check, draft, warrant, order, or certificates of deposit, or any public funds entrusted to it if, in failing to pay, the depository credit union acts contrary to the terms of an agreement between the depository credit union and the public body treasurer. The depository credit union and the security given for the public funds in its hands are also liable for payment if the depository credit union fails to pay an assessment by the treasurer of state when the assessment is due.

3. If a depository credit union is closed by its primary regulatory officials, the public body with deposits in the depository shall notify the treasurer of state of the amouftt of any claim within thirty days of the closing credit union may sell the collateral to pay for any loss of principal and accrued interest. The treasurer of state shall implement the follov1ing proee dure&.-

a. In cooperation with the responsible regulatory officials for the depository credit union, the treasurer public body shall validate the amount of public funds on deposit at the default- ing depository credit union and the amount of deposit insurance applicable to the deposits.

b. The loss to public depositors shall be satisfied, first through any applicable deposit insurance and then through the sale of securities pledged by the defaulting depository credit union, and then the assets of the defaulting depository credit union. The priority of claims are those established pursuant to section 524.1312, subsection 2, section 533.22, subsection 1, paragraph "b", or section 534.517. To the extent permitted by federal law, in the distribu- tion of an insolvent federally chartered depository's credit union's assets, the order of pay- ment of liabilities if its assets are insufficient to pay in full all its liabilities for which claims are made shall be in the same order as for the equivalent type of state chartered depository credit union as provided in section 524.1312, subsection 2, section 533.22, subsection 1, paragraph "b", or section 534.517.

c. The claim of a public depositor for purposes of this section shall be the amount of the depositor's deposits plus interest to the date the funds are distributed to the public depositor at the rate the depository institution credit union agreed to pay on the funds reduced by the portion of the funds which is insured by federal deposit insurance.

d. If the loss to public funds is not covered by insurance and the proceeds of the failed depository's credit union's assets which are liquidated within thirty days of the closing of the depository credit union and pledged collateral, the treasurer shall provide coverage of the remaining loss as follows:

fl7 If the loss was incurred in a bani~. then any further payments to cover the loss will eo me from the state sinldng fund for pub lie deposits in banl~s. If the balance in that sinldng fund is inadequate to pay the entire loss, then the treasurer shall obtain the additional amount needed by maldng an assessment against other banl~s whose pub lie funds deposits mweed deposit insurance eo•1erage. A banl~'s assessment shall be determined by multiply ing the total amount of the remaining loss to all public depositors by a percentage that represents that banl~'s proportional share of the average of uninsured public funds deposits held by all banl~s as of the reporting date under section 12C.21 immediately preceding the date the depository v1as closed. Each bani~ shall pay its assessment to the treasurer within three business days after it reeei•1es notice of assessment. If a bani~ fails to pay its assess ment when due, the treasurer shall satisfy the assessment by selling securities pledged by that bank If the securities pledged by that banli: are inadequate to pay the assessment, the treasurer of state shall mal~e additional assessments as may be necessary against other banl~s which hold uninsured pub lie funds to satisfy any unpaid assessment. Any additional assessments shall be determined, collected, and satisfied in the same manner as the first assessment. If a bani~ fails to pay its assessment vrhen due, the treasl:lrer of state shall initiate a lawsuit to collect the assessment. If a bani~ is found to have failed to pay the assessment as required by this subparagraph, the court shall order it to pay the assessment, court costs, reasonable attorney's fees based on the amount of time the attorney general's

211 LAWS OF THE SEVENTY-EIGHTH G.A., 1999 SESSION CH.ll7

office speat prepariag aad briagiag the aetioa, aad reasoaable CJ(peases iaeurred by the treasurer of state. Idle balaaees ia the fuad shall be iavested by the treasurer •.vith eamiags credited to the fuad. Fees paid by baaks for adffi:iaistratioa of this chapter shall be credited to the fuad aad the treasurer may deduct actual costs of admiaistratioa from the fuad. ~ If the loss v;as iReurred iR a credit uaioa, thea aRy further paymeats to cover the loss

will come from the state sinking fund for public deposits in credit unions. If the funds are inadequate to cover the entire loss, then the treasurer shall make an assessment against other credit unions who hold public funds. The assessment shall be determined by multiply- ing the total amount of the remaining loss to public depositors by a percentage that repre- sents the average of public funds deposits held by all credit unions during the preceding twelve-month period ending on the last day of the month immediately preceding the month the depository credit union was closed. Each credit union shall pay its assessment to the treasurer within three business days after it receives notice of assessment. If a credit union fails to pay its assessment when due, the treasurer of state shall initiate a lawsuit to collect the assessment. If a credit union is found to have failed to pay the assessment as required by this subparagraph,* the court shall order it to pay the assessment, court costs, reasonable attorney's fees based upon the amount of time the attorney general's office spent preparing and bringing the action, and reasonable expenses incurred by the treasurer of state's office. Idle balances in the fund are to be invested by the treasurer with earnings credited to the fund. Fees paid by credit unions for administration of this chapter will be credited to the fund and the treasurer may deduct actual costs of administration from the fund. ~ If the loss was iReurred ia a saviRgs aRd leaR or a saviags baal~:, thea aey further

paymeats to eo•;er the loss will come from the state siRldag fuad for public deposits ia saviags aad leaR assoeiatioRs aRd saviRgs baRli:s. If the fuRds are iaadeetuate to cover the eatire loss, thea the treasurer shall malw aa assessffieat agaiast other sav-iags aad loaas aRd sav-iags baal~:s who hold public fuads. The assessffieat shall be determiaed by multiply iRg the total aftlouRt of the remaiRiRg loss to public depositors by a pereeatage that repre seats the average of public fuads deposits held by all sav-iags aad loaas aad saviags baRlrs duriag the preeediRg twelye moatb period eRdiRg OR the last day of the moath immediately preeediag the moRth the depository was closed. Each swARgs aad loaa aad saviags baal~: shall pay its assessRleRt to the treasurer withia three busiaess days after it reeeiYes aotiee of assessmeat. If a sa·Aags aRd loaa or saviags baal~: fails to pay its assessmeat 'Nhea due, the treasurer shall iaitiate a lawsuit to collect the assessmeRt. If a saviags aad loaa assoeiatioa or a saviRgs baalr is fouad to ha·;e failed to pay the assessmeat as reetuired by this subpara graph, the court shall order it to pay the assessffieRt, court costs of the aetioa, reasoaable attorney's fees based upoa the amouRt of time the attorney geaeral's effiee speat prepariag aad briagiag the aetioR, aRd reasoRable CJ(peRses iaeurred by the treasurer of state's office.

e. Any amount realized from the sale of collateral pursuant to paragraph "d", subpara graphs (1) aad (2) in excess of the amount of a depository's credit union's assessment, shall continue to be held by the treasurer, in the same interest bearing investments available for public funds, as collateral until that depository credit union provides substitute collateral or is otherwise entitled to its release.

f:. Fello·.viag eolleetioR of the assessRleRts, the state treasurer shall distribute fuads to the public depositors of the failed depository aeeordiRg to their YalidateEl claims. If the assets t¥t'ailable are less thaa the total deposits, the treasurer shall prorate the claims. A public depositor reeeiviRg paymeRt uader this seetioa shall assiga to the treasurer aay iaterest the public depositor Rlay have iR fuads that subseEfUeatly become available to depositors of the defaultiag depository.

Sec. 12. NEW SECTION. 12C.23A PAYMENT OF LOSSES IN A BANK. 1. The acceptance of public funds by a bank pursuant to this chapter constitutes consent

by the bank to assessments by the treasurer of state in accordance with this chapter.

• See chapter 208, §43 herein

CH.ll7 LAWS OF THE SEVENTY-EIGHTH G.A., 1999 SESSION 212

2. The bank is liable for payment if the bank fails to pay a check, draft, or warrant drawn by the public officer or to account for a check, draft, warrant, order, or certificates of deposit, or any public funds entrusted to it if, in failing to pay, the bank acts contrary to the terms of an agreement between the bank and the public body treasurer. The bank is also liable for payment if the bank fails to pay an assessment by the treasurer of state when the assess- mentis due.

3. If a bank is closed by its primary regulatory officials, the public body with deposits in the bank shall notify the treasurer of state of the amount of any claim within thirty days of the closing. The treasurer of state shall implement the following procedures:

a. In cooperation with the responsible regulatory officials for the bank, the treasurer shall validate the amount of public funds on deposit at the defaulting bank and the amount of deposit insurance applicable to the deposits.

b. The recovery of any loss to public depositors shall begin with applicable deposit insur- ance. The priority of claims are those established pursuant to section 524.1312, subsection 2, section 533.22, subsection 1, paragraph "b", or section 534.517.* To the extent permitted by federal law, in the distribution of an insolvent federally chartered bank's assets, the order of payment of liabilities if its assets are insufficient to pay in full all its liabilities for which claims are made shall be in the same order as for a state-chartered bank as provided in section 524.1312, subsection 2.

c. The claim of a public depositor for purposes of this section shall be the amount of the depositor's deposits plus interest to the date the funds are distributed to the public depositor at the rate the bank agreed to pay on the funds reduced by the portion of the funds which is insured by federal deposit insurance.

d. If the loss to public funds is not covered by insurance and the proceeds of the failed bank's assets which are liquidated within thirty days of the closing of the bank, are not sufficient to cover the loss, then any further payments to cover the loss will come from the state sinking fund for public deposits in banks. If the balance in that sinking fund is inad- equate to pay the entire loss, then the treasurer shall obtain the additional amount needed by making an assessment against other banks whose public funds deposits exceed deposit insurance coverage. A bank's assessment shall be determined by multiplying the total amount of the remaining loss to all public depositors by a percentage that represents that bank's proportional share of the average of uninsured public funds deposits held by all banks. Each bank shall pay its assessment to the treasurer within three business days after it receives notice of assessment. If a bank fails to pay its assessment when due, the treasurer of state shall initiate a lawsuit to collect the assessment. If a bank is found to have failed to pay the assessment as required by this subparagraph, the court shall order it to pay the assessment, court costs, reasonable attorney fees based on the amount of time the attorney general's office spent preparing and bringing the action, and reasonable expenses incurred by the treasurer of state. Idle balances in the fund shall be invested by the treasurer with earnings credited to the fund. Fees paid by banks for administration of this chapter shall be credited to the fund and the treasurer may deduct actual costs of administration from the fund.**

e. Following collection of the assessments, the state treasurer shall distribute funds to the public depositors of the failed bank according to their validated claims. If the assets avail- able are less than the total deposits, the treasurer shall prorate the claims. A public deposi- tor receiving payment under this section shall assign to the treasurer any interest the public depositor may have in funds that subsequently become available to depositors of the default- ing bank.

Sec. 13. Section 12C.25, subsection 3, Code 1999, is amended by striking the subsection.

Sec. 14. Section 12C.21, Code 1999, is repealed.

• See chapter 208, §44 herein •• See chapter 208, §45 herein

213 LAWS OF THE SEVENTY-EIGHTH G.A., 1999 SESSION CH.ll9

Sec. 15. EFFECTIVE DATE. This Act, being deemed of immediate importance, takes effect upon enactment.

Approved May 11, 1999

CHAPTER 118 DUST CONTROL ON SECONDARY ROADS -

PRIMARY ROAD FUND EXPENDITURE

H.F. 634

AN ACT relating to expenditure of moneys from the primary road fund for dust control on certain roads.

Be It Enacted by the General Assembly of the State of Iowa:

Section 1. Section 313.4, subsection 1, Code 1999, is amended by adding the following new unnumbered paragraph:

NEW UNNUMBERED PARAGRAPH. The department may expend moneys from the fund for dust control on a secondary road when there is a notable increase in traffic on the secondary road due to closure of a road by the department for purposes of establishing, constructing, or maintaining a primary road.

Approved May 11, 1999

CHAPTER 119 LOESS HILLS DEVELOPMENT AND CONSERVATION

H.F. 218

AN ACT creating a loess hills preservation and development alliance, providing for its responsibilities, and providing for other properly related matters, and providing an applicability date.

Be It Enacted by the General Assembly of the State of Iowa:

Section 1. Section 161D.1, subsection 4, Code 1999, is amended to read as follows: 4. This seetiea chapter is not intended to affect the authority of the department of natural

resources in its acquisition, development, and management of public lands within the coun- ties represented by the authority.

Sec. 2. Section 161D.2, Code 1999, is amended to read as follows: 161D.2 LOESS HILLS DEVELOPMENT AND CONSERVATION FUND. A loess hills development and conservation fund is created in the state treasury;-te~

fund shall include a hungry canyons account and a loess hills alliance account which shall