Division of Treasury Bureau of Collateral Management Public Deposit Program Chapter 280

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Division of TreasuryBureau of Collateral
ManagementPublic Deposit Program(Chapter 280)
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Who We Are

• The Bureau of Collateral Management serves as a
  centralized deposit location for specialized
  handling of regulatory collateral deposits that
  may be required of various entities as a
  condition of doing business or acts of financial
  guarantee under approximately 45 state statutes.
• The service ensures the deposits or pledges meet
  the requirements of each applicable law for
  eligibility, quality and market or par value.
• This deposit specialization allows state agencies
  and municipal entities to benefit from the use of
  custodial contracts for perfection of security
  interest and financial information services to
  assure value and quality.

Florida State Treasury, October 30, 2008
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Our 3 Primary Responsibilities

• Collateral Administration Program
• Manage Collateral/Pledged Assets for State
  Agencies, Boards, or Other Political Subdivisions
• Qualified Public Deposits Program
• Protect Public Deposits in Financial Institutions
  (Chapter 280)
• Cash Escrow Program
• Provide Escrow Agent Services

Florida State Treasury, October 30, 2008
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Organizational Structure
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Current Service Levels

• Collateral Administration
• 2,000 Accounts (Approx ½ for Office of Insurance
  Regulation) (3-09)
• 20.2 billion held in custody (3-09)
• Qualified Public Deposit Program
• 209 Qualified Public Depositories (included
  above)
• 1,583 Reporting Public Units (11-08 Annual Report
  Filings)
• 17.3 billion in Net Public Deposits in QPDs
  (3-09)
• Secured by 18.7 billion in Assets (3-09)
• Cash Escrow Program
• 760 million in Treasury Cash
• 500-600 individual accounts

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Chapter 280, Florida StatutesFlorida
Administrative Code 69C-2

• Enacted in 1981 by the FBA and Treasury
• Modeled after the state of Virginia law
• Defined collateral standards for all public
  deposits (custody, rankings, participation)
• Established contingent liability requirements for
  Banks Saving Institutions participating in the
  program

Florida State Treasury, October 30, 2008
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Program Design

• Program mandatory for Governmental Units
  (question of compliance)
• All Qualified Public Depositories (QPDs) share
  the exposure (Contingent Liability)
• Florida State Treasury administers the program
  monitors QPD condition
• Florida State Treasury has compliance
  responsibility and authority but no audit
  authority or capability

Florida State Treasury, October 30, 2008
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Primary Program Benefits

• Guarantees Public Depositors against loss
• Public Depositors have minimal responsibilities
  (no negotiation of protection)
• Provides the financial community a Standardized
  Cost Effective Program
• QPDs save over 5 Billion in collateral
  requirements (NOTE Changes to deposit levels)
• QPDs qualify for State CD Program

Florida State Treasury, October 30, 2008
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The Public Depositors

• How many of you are public depositors?
• How do you know if you are a public depositor?
• How do you protect your deposit accounts?
• Do you know the difference between a deposit an
  investment?
• Are investments covered?

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Public Depositors Responsibility

• Make sure you are using a QPD
• Execute Safekeep
• Public Deposit Identification Acknowledgment
  Form
• File a Public Depositor Annual Report
• Report any notices received from a regulator
  concerning a QPDs condition

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As a Public Depositor

• Do you have your original/signed
• Public Depositor Identification Acknowledgment
  Form (DFS-J1-1295)?
• How Old is it?
• Have you filed your
• Annual Report (DFS-J1-1009)?
• (As of 9-30, due to us 11-30)

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Qualified Public DepositoriesInside The Numbers

• 209 Qualified Public Depositories (03-09)
• 1,583 Reporting Public Units (11-08)
• 18.7 Billion in Pledged Collateral (03-09)
• 17.3 Billion in Net Public Deposits (03-09)
• (Property tax increase in December each year
  for approximately 3 months increasing pledged
  collateral, SBA Money rolled into banks in
  November 2007)

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Deposit Trend
09-07 12-07 03-08 06-08 09-08 12-09
03-09
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Pledge Level Determination

• QPDs file a quarterly Call Report with the Feds
• QPDs report monthly Gross/Net properly identified
  average deposits key financial data
• Rankings are downloaded quarterly from two
  sources (IDC and Financial Information Services)
  based on Call Reports
• Collateral Administration Program (CAP) generates
  pledge level change suggestions
• Changes are analyzed for action
• Major changes added to Special Handling List

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Pledge Levels Rankings(3-09)
Current Rankings 19-25
73-50 7-90-110 108-125
1-150 1-200

• Pledge Levels
• 2570-100
• 5030-69
• 12516-29
• 2000-15
• Based on 4 quarter averages
• for consistency
• Based on 1 quarter average
• for rapid response

209-Current QPDs 187-Banks 22-Thrifts 174-In
State 35-Out of State 114-FL State Chartered
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The Issues

• Our ranking data can be 6 months behind
• Financial data can be 4 months behind
• We rely on multiple sources for information
• We have no examination/audit authority
• Section 655.057(3)(e), Florida Statutes
• (Public Records vs. Confidentiality issues)
• The Past
• The Present
• The Future (Public Deposits in non-QPDs Accurate
  reporting in QPDs.)

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How We ReactThe Triggers

• Call Report Data
• Income Statement, Balance Sheet,
  Assets/Liabilities, Past Due/Non-accrual Loans,
  Capital Adequacy
• System Recommended Changes
• Performance Ratios
• Capital Adequacy (3), Asset Quality (7),
  Earnings (8), Liquidity (4)
• Peer Group Comparison
• Individual and Industry Trends

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Analysis Considerations

• What are the critical trends/changes?
• What are the sources of public deposits?
• What are the minimum collateral requirements?
• What type of collateral is pledged?
• How much is still available for pledging?
• What impact will increases in the MRC have on
  their adequacy/liquidity?

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Special Handling Requirements

• 0-15 Withdrawal (Cannot mandate withdrawal)
• Alternative Participation Agreement
• CFO Custody vs. Regular Custody
• 200 Collateral
• Capped Deposits
• No New Accounts
• Withdrawn-12 month requirement

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Your QPD Fails

• First
• Notify our office
• Second
• Determine if there is an uninsured loss with the
  FDIC
• Third File a claim for uninsured deposits within
  30 days Public Deposit Claim Form and Agreement
  (DFS-J1-1012) The Original Public Depositor
  Identification Acknowledgment Form
  (DFS-J1-1295)

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What If?

• Failure History since 1981
• Communication of Those Failures
• Type of Failures
• Collateral Levels
• Assessment Process
• Recent History of Failure

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Recovery Timeline

• Historical Failures (Friday closings)
• We notify Public Depositors of record by first
  class mail (required by law) email
• Claims filing deadline is 30 days from date of
  notice
• Each case can be different
• Reported deposits
• Collateral level/value
• FDIC Action of disposition
• New FDIC coverage (history)
• QPD Assessment/No Assessment
• Worse case scenario?

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Critical Requirements

• Section 280.08(2) states that The potential loss
  to public depositors shall be calculated by
  compiling claims received from such depositors.
  The Chief Financial Officer shall validate claims
  on public deposit accounts which meet the
  requirements of s. 280.17 and are confirmed as
  provided in subsection (1).
• Section 280.17(2)(c) provides that each public
  depositor shall Maintain the current public
  deposit identification and acknowledgment form as
  a valuable record. Such form is mandatory for
  filing a claim with the Chief Financial Officer
  upon default or insolvency of a qualified public
  depository.
• Section 280.17(4)(b) provides that each public
  depositor shall Submit to the Chief Financial
  Officer for each public deposit, within 30 days
  after the date of official notification from the
  Chief Financial Officer, the following
• A claim form and agreement, as prescribed by the
  Chief Financial Officer, executed under oath,
  accompanied by proof of authority to execute the
  form on behalf of the public depositor.
• A completed public deposit identification and
  acknowledgment form, as described in subsection
  (2).
• Evidence of the insurance afforded the deposit
  pursuant to the Federal Deposit Insurance Act.
• And finally, Section 280.17(8) states that If a
  public depositor does not comply with this
  section on each public deposit account, the
  protection from loss provided in s. 280.18 is not
  effective as to that public deposit account.

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Key Information Links

• http//www.fltreasury.org/
• Collateral Management Link connects you to our
  web server
• Introduction
• QPDs
• Governmental Units (Key information)
• Links
• Forms
• FAQs

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Where is the information?

• www.fltreasury.org (follow link to Collateral
  Management)
• Program Administrator
• Ken Lee kenneth.lee_at_myfloridacfo.com
• 850-413-3383 (Direct Line)
• Bureau Chief
• Nat Toulon nat.toulon_at_myfloridacfo.com
• 850-413-3324 (Direct Line)

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Questions?
http//www.fltreasury.org/
Florida State Treasury, June, 2009