What's happening
This bill allows credit unions, savings banks, and savings and loan associations to accept and secure deposits of public funds from New York municipal corporations, with certain limits and requirements.
Why it matters
Expands Local Banking Options. By allowing municipal governments to deposit public funds in credit unions, savings banks, and savings and loan associations—not just commercial banks—the bill could increase competition for public deposits, potentially resulting in better interest rates or services for local governments.
Boosts Community Financial Institutions. Credit unions and savings institutions are often smaller and more locally oriented than major commercial banks. This bill could help them grow by giving them access to stable municipal deposits, possibly strengthening local economies and increasing their capacity to lend locally.
Imposes Deposit Limits and Safeguards. The bill limits public deposits to $1 million per credit union, savings bank, or savings and loan association to manage risk. It also requires that deposits are insured or properly collateralized, maintaining financial safeguards for taxpayer money.
Adds Transparency and Accountability. New requirements for municipalities to file deposit resolutions with the state comptroller aim to improve oversight and record-keeping, helping ensure compliance and building public trust in how local funds are managed.
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Who cares
Headline styles
Let Credit Unions Hold Public Money
Plain English, a few words. Used as the page title.
Sponsors
No co-sponsors yet.
History
- Referred to local government
- Referred to local government
Companion bill
The same bill in the other chamber. A bill becomes law when one version passes both houses and the governor signs it, so either number can carry it.
Let Credit Unions Hold Town Money
In Assembly Committee · Banks · Sponsor Phil Steck
Full text
9 pagesUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
1586
2019-2020 Regular Sessions
IN SENATE
January 15, 2019
Introduced by Sen. SANDERS -- 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 state finance law, in relation to allowing credit unions, savings banks, savings and loan associations and federal savings associations to accept and secure deposits from municipal corporations
The People of the State of New York, represented in Senate and Assembly, 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 association's, credit union's, or trust company's account agreement or policies.
§ 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 federallychartered 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.
k. "Savings and loan association" shall mean a savings and loan association as defined by subdivision eight of section two of the banking law or any federal savings and loan association.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD03608-01-9
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§ 3. Subdivisions 2, 3 and 4 of section 10 of the general municipal law, as amended by chapter 623 of the laws of 1998, paragraph a of subdivision 2 as amended by chapter 128 of the laws of 2012, paragraphs a and b of subdivision 3 as amended by chapter 545 of the laws of 2005, paragraph c of subdivision 3 as amended by chapter 615 of the laws of 2002, 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 designate 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 banks, savings and loan associations, credit unions or trust company. Such designations and amounts may be changed at any time by further resolution. 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.
(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 government'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 association, 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 company 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 redeposited 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
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amount of the local government's funds redeposited by the designated bank, savings bank, savings and loan association, credit union or trust company.
b. Except as otherwise provided by law, all deposits shall be made to the credit of the local government. The deposit of public funds pursuant 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. The governing board of a local government, in which a banking development district has been designated by the superintendent of financial services pursuant to section ninety-six-d of the banking law, may designate a bank, savings bank, savings and loan association, credit union, 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 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 depositories. Such resolution shall specify the maximum amount which may be kept on deposit at any time with such bank, savings bank, savings and loan association, credit union, trust company or national bank located in such district. 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. 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 certificate of deposit rate. In those instances where there is such an agreement, its terms and conditions shall also be specified in the resolution. Any such designation, amount, or agreement provisions may be changed at any time by further resolution.
d. Notwithstanding any provision of law to the contrary, no bank, savings bank, savings and loan association or credit union shall be designated for deposits of funds pursuant to the provisions of this section or section eleven of this article unless the taxes described in subdivision one of section two hundred fifty-three of the tax law are paid on loans secured by mortgages that are provided by any such bank, savings bank, savings and loan association or credit union. Any funds deposited in any such bank, savings bank, savings and loan association or credit union shall be withdrawn in accordance with the terms of any deposit agreement if such taxes were not paid at the time any such mortgages were recorded.
3. All public deposits in excess of the amount insured under the provisions of the Federal Deposit Insurance Act or by the National Credit Union Administration under the Federal Credit Union Act as now or hereafter amended shall be secured in accordance with this subdivision:
a. The officers making a deposit may accept a pledge of eligible securities having in the aggregate a market value at least equal to the aggregate amount of public deposits from such officers, or a pledge of a pro rata portion of a pool of eligible securities having in the aggregate a market value at least equal to the aggregate amount of public deposits from all such officers within the state at such bank, savings bank, savings and loan association, credit union or trust company,
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together with a security agreement from the bank, savings bank, savings and loan association, credit union or trust company. The security agreement and custodial agreement referred to below may be the same agreement including when the bank, savings bank, savings and loan association, credit union or trust company holding the public deposits holds the collateral for the public body. The security agreement shall provide that such eligible securities or pro rata portion of a pool of eligible securities are being pledged by the bank or trust company as security for the public deposits, together with agreed upon interest, if any, and any costs or expenses arising out of the collection of such deposit upon a default. It shall also provide for the conditions under which the securities or pro rata portion of a pool of eligible securities held may be sold, presented for payment, substituted or released and the events of default which will enable the local government to exercise its rights against the pledged securities. Such agreement shall include all provisions deemed necessary and sufficient to secure in a satisfactory manner the local government's interest in the collateral. The custodial agreement shall provide that the pledged securities or pro rata portion of a pool of eligible securities will be held by the custodial bank, savings bank, savings and loan association, credit union or trust company as agent of, and custodian for, the local government, and will be kept separate and apart from the general assets of the custodial bank, savings bank, savings and loan association, credit union or trust company and it shall also provide for the manner in which the custodial bank, savings bank, savings and loan association, credit union or trust company shall confirm the receipt, substitution or release of the collateral. Such agreement shall provide for the frequency of revaluation of collateral by the custodial bank, savings bank, savings and loan association, credit union or trust company and the substitution of collateral when a change in the rating of a security causes ineligibility pursuant to paragraph [f] g of subdivision one of this section. Such agreement shall include all provisions deemed necessary and sufficient to secure in a satisfactory manner the local government's interest in the collateral. Such agreement may also contain such other provisions as the governing board may deem necessary.
b. Whenever eligible securities delivered to a custodial bank, savings bank, savings and loan association, credit union or trust company pursuant to this paragraph are transferred by entries on the books of a federal reserve bank or other book-entry system operated by a federally regulated entity without physical delivery of the evidence of such obligations, the records of the custodial bank, savings bank, savings and loan association, credit union or trust company shall show, at all times, the interest of the local government in such securities or pro rata portion of a pool of eligible securities as set forth in the security agreement.
c. (i) In lieu of or in addition to the deposit of eligible securities, the officers making a deposit may accept an eligible surety bond payable to such local government as security for the payment of one hundred percent, or an eligible letter of credit payable to such local government as security for the payment of one hundred forty percent, of the aggregate amount of public deposits from such officers and the agreed upon interest, if any. The terms and conditions of any eligible surety bond shall be approved by the governing board.
(ii) In lieu of or in addition to the deposit of eligible securities, the officers making a deposit may, in the case of an irrevocable letter of credit issued in favor of the local government by a federal home loan
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bank whose commercial paper and other unsecured short-term debt obligations are rated in the highest rating category by at least one nationally recognized statistical rating organization, accept such letter of credit payable to such local government as security for the payment of one hundred percent of the aggregate amount of public deposits from such officers and the agreed upon interest, if any.
d. For purposes of determining the market value of securities as required by this subdivision:
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Sponsor's memo
Title of bill
An act to amend the general municipal law and the state finance law, in relation to allowing credit unions, savings banks, savings and loan associations and federal savings associations to accept and secure deposits from municipal corporations
Purpose
To amend the general municipal law and the state finance law, in relation to allowing credit unions, savings banks, savings and loan associations and federal savings associations to accept and secure deposits from municipal corporations
Summary of provisions
This bill would amend Sections 10 and 11 of the General Municipal Law to authorize deposits of municipal funds in credit unions, savings banks and savings and loan associations. Deposits would only be authorized in any particular bank, credit union or savings and loans associations if such bank, credit union or savings and loans association pays the mort- gage recording taxes required by Article 11 of the Tax Law. 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 would be limited to one million dollars per deposi- tary.
Existing law
New law
Justification
This legislation advances New York City's long-standing goals of ensur- ing a fair and vibrant marketplace for consumers and businesses, through licensing, public education, and the enforcement of the City's consumer protection laws. The New York City Department of Consumer Affairs (DCA) Office of Financial Empowerment (OFE) was launched by the Center for Economic Opportunity in December 2007, as the first local government initiative in the nation aimed expressly at educating, empowering, and protecting those with low incomes, so they can build assets and make the most of their financial resources. One of OFE's primary goals is to ensure that individuals with low incomes have access to affordable, appropriate financial products offered by mainstream financial insti- tutions, rather than having to rely on costly fringe services that erode their limited resources.
The efforts of DCA's OFE to link low income families to mainstream financial institutions through safe and affordable products and services depend upon a broad array of financial institution partners, including community development credit unions and banks. OFE's most innovative pilot programs to reach underbanked populations and help build savings such as the "SaveNYC" and "Opportunity NYC" accounts - have relied upon the flexibility and creativity of credit unions and savings banks. Cred- it unions and savings banks often have branches located in the low income communities OFE targets, and offer basic transactional financial products that are more transparent and lower cost for low income house- holds than products offered by commercial banks. OFE's ability to increase the scale of existing pilot new programs and pilot new innova- tive banking products and services depends on the continued partnership of these types of institutions. Municipal deposits could allow credit unions and savings banks to increase their deposit base, and greatly scale up the offering of affordable products to serve New Yorkers with low incomes throughout New York City and State.
This legislation would allow DCA's OFE to expand its efforts to link families with low incomes to safe, affordable products and services offered by mainstream financial institutions.
Accordingly, the Mayor urges the earliest possible favorable consider- ation of this proposal by the Legislature.
Legislative history
01/06/16 Referred to Local Government 02/04/15 Referred to Local Government
Fiscal implications
None
Local fiscal implications
None
Effective date
This act shall take effect immediately.
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