2012 Connecticut General Statutes
Title 36a - The Banking Law of Connecticut
Chapter 665a - Deposits
Section 36a-333 - (Formerly Sec. 36-386). Collateral requirements.

(a) To secure public deposits, each qualified public depository shall at all times maintain, segregated from its other assets as provided in subsection (b) of this section, eligible collateral in an amount at least equal to the following percentage of uninsured public deposits held by the depository: (1) For any qualified public depository having a risk-based capital ratio of ten per cent or greater, a sum equal to ten per cent of all uninsured public deposits held by the depository; (2) for any qualified public depository having a risk-based capital ratio of less than ten per cent but greater than or equal to eight per cent, a sum equal to twenty-five per cent of all uninsured public deposits held by the depository; (3) for any qualified public depository having a risk-based capital ratio of less than eight per cent but greater than or equal to three per cent, a sum equal to one hundred per cent of all uninsured public deposits held by the depository; (4) for any qualified public depository having a risk-based capital ratio of less than three per cent, and, notwithstanding the provisions of subdivisions (1) to (3), inclusive, of this subsection, for any qualified public depository which has been conducting business in this state for a period of less than two years except for a qualified public depository that is a successor institution to a qualified public depository which conducted business in this state for two years or more, a sum equal to one hundred twenty per cent of all uninsured public deposits held by the depository; provided, the qualified public depository and the public depositor may agree on an amount of eligible collateral to be maintained by the depository that is greater than the minimum amounts required under subdivisions (1) to (4), inclusive, of this subsection; (5) notwithstanding the risk-based capital ratio provisions of subdivisions (1) to (3), inclusive, of this subsection, for any qualified public depository that is an uninsured bank, a sum equal to one hundred twenty per cent of all public deposits held by the depository; and (6) notwithstanding the risk-based capital ratio provisions of subdivisions (1) to (3), inclusive, of this subsection, for any qualified public depository that is subject to an order to cease and desist, consent order or a preliminary warning letter, or has entered into a stipulation and agreement, memorandum of understanding or a letter of understanding and agreement with a bank or credit union supervisor, a sum equal to one hundred twenty per cent of all uninsured public deposits held by the depository, or, in the case of such a qualified public depository that satisfies the requirements of subsection (f) of this section, a sum equal to one hundred per cent of all uninsured public deposits held by the depository. Notwithstanding the provisions of this subsection, the qualified public depository and the public depositor may agree on an amount of eligible collateral to be maintained by the depository that is greater than the minimum amounts required under subdivisions (1) to (6), inclusive, of this subsection. For purposes of this subsection, the amount of all uninsured public deposits held by the depository shall be determined at the close of business on the day of receipt of any public deposit and any deficiency in the amount of eligible collateral required under this section shall be cured not later than the close of business on the following business day. For purposes of this subsection, the depository’s risk-based capital ratio shall be determined, in accordance with applicable federal regulations and regulations adopted by the commissioner in accordance with chapter 54, based on the most recent quarterly call report, provided (A) if, during any calendar quarter after the issuance of such report, the depository experiences a decline in its risk-based capital ratio to a level that would require the depository to maintain a higher amount of eligible collateral under subdivisions (1) to (4), inclusive, or subdivision (6) of this subsection, the depository shall increase the amount of eligible collateral maintained by it to the minimum required under subdivisions (1) to (4), inclusive, or subdivision (6) of this subsection, as applicable, based on such lower risk-based capital ratio and shall notify the commissioner of its actions; and (B) if, during any calendar quarter after the issuance of such report, the commissioner reasonably determines that the depository’s risk-based capital ratio is likely to decline to a level that would require the depository to maintain a higher amount of eligible collateral under subdivisions (1) to (4), inclusive, or subdivision (6) of this subsection, the commissioner may require that the depository increase the amount of eligible collateral maintained by it to the minimum required under subdivisions (1) to (4), inclusive, or subdivision (6) of this subsection, as applicable, based on the commissioner’s determination of such lower risk-based capital ratio. For purposes of determining the minimum market value of the eligible collateral under subsection (e) of this section, a qualified public depository shall apply the collateral ratio using uninsured public deposits.

(b) Each qualified public depository having a risk-based capital ratio of eight per cent or greater shall transfer eligible collateral maintained under subsection (a) of this section to its own trust department, provided such trust department is located in this state unless the commissioner approves otherwise, to the trust department of another financial institution, provided such eligible collateral shall be maintained in such other financial institution’s trust department located in this state unless the commissioner approves otherwise, or to a federal reserve bank or federal home loan bank. Each qualified public depository having a risk-based capital ratio of less than eight per cent shall transfer eligible collateral maintained under subsection (a) of this section to the trust department of a financial institution that is not owned or controlled by the depository or by a holding company owning or controlling the depository, provided such eligible collateral shall be maintained in such other financial institution’s trust department located in this state unless the commissioner approves otherwise, or to a federal reserve bank or federal home loan bank. Such transfers of eligible collateral shall be made in a manner prescribed by the commissioner. Eligible collateral shall be valued at market value or as determined by the commissioner if market value is not readily determinable, and the value of such eligible collateral shall be determined and adjusted on a quarterly basis. Without the requirement of any further action, the commissioner shall have, for the benefit of public depositors, a perfected security interest in all such eligible collateral held in such segregated trust accounts, granted pursuant to and in accordance with the terms of the agreement between the public depositor and the qualified public depository. Such security interest shall have priority over all other perfected security interests and liens.

(c) The depository shall have the right to make substitutions of eligible collateral at any time without notice. The depository shall have the right to reduce the amount of eligible collateral maintained under subsection (a) of this section provided such reduction shall be determined based on the amount of all uninsured public deposits held by the depository and the depository’s risk-based capital ratio as determined in accordance with said subsection (a). The depository shall provide written notice to its public depositors of any such reduction in the amount of eligible collateral maintained under subsection (a) of this section.

(d) The income from the assets which constitute segregated eligible collateral shall belong to the depository without restriction.

(e) Eligible collateral pledged to secure public deposits under subsection (a) of this section shall have a minimum market value as expressed in the following collateral ratios:

		Collateral Ratio
Form of Eligible		(Market value
Collateral Pledged		divided by public deposit plus accrued interest)
1. United States Treasury bills, notes and bonds
	A. Maturing in less than one year	102%
	B. Maturing in one to five years	105%
	C. Maturing in more than five years	110%
	D. Zero-coupon treasury securities with maturities exceeding ten years	120%
2. Actively traded United States government agency securities
	A. Maturing in less than one year	103%
	B. Maturing in one to five years	107%
	C. Maturing in more than five years	115%
3. United States government agency variable rate securities		103%
4. Government National Mortgage Association mortgage pass-through or participation certificates or similar securities
	A. Current issues	115%
	B. Older issues	120%
	C. Issues for which prices are not quoted	125%
5. Other United States government securities		125%
6. Other mortgage pass-through or participation certificates or similar securities
7. One-to-four family residential mortgages		125%
8. State and municipal bonds
	A. General obligation bonds
	i. Maturing in less than one year	102%
	ii. Maturing in one to five years	107%
	iii. Maturing in more than five years	110%
	B. Revenue bonds
	i. Maturing in less than one year	105-110%
	ii. Maturing in one to five years	110-120%
	iii. Maturing in more than five years	120-130%

(f) A qualified public depository that is subject to an order to cease and desist, consent order or a preliminary warning letter, or has entered into a stipulation and agreement, memorandum of understanding or a letter of understanding and agreement with a bank or credit union supervisor, may maintain eligible collateral in a sum equal to or greater than one hundred per cent of all uninsured public deposits held by the depository, provided (1) the depository has a risk-based capital ratio of twelve per cent or greater, and (2) the depository satisfies the following conditions, to the extent applicable: (A) The depository may not pledge eligible collateral in the form described in subsection (e)6. of this section, except for mortgage pass-through or participation certificates or similar securities that have been issued or guaranteed by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation and for which prices are quoted; (B) the depository may not pledge eligible collateral in the form described in subsection (e)4.C. of this section; (C) if the public depository pledges eligible collateral in the form described in subsection (e)7. of this section, the collateral ratio for such mortgages shall be one hundred fifty per cent; and (D) if the public depository pledges eligible collateral in the form described in subsection (e)8. of this section, such collateral shall be rated in the three highest rating categories by a rating service recognized by the commissioner. The depository may pledge any other eligible collateral that is not limited by subdivision (2) of this subsection.

(1967, P.A. 517, S. 5; P.A. 77-614, S. 156, 587, 610; P.A. 78-303, S. 85, 136; P.A. 87-9, S. 2, 3; P.A. 91-245, S. 4; P.A. 94-122, S. 158, 340; P.A. 95-155, S. 23, 29; P.A. 03-196, S. 9; P.A. 04-136, S. 34; P.A. 05-39, S. 7; P.A. 06-10, S. 5; P.A. 11-50, S. 9; P.A. 12-96, S. 37–39.)

History: P.A. 77-614 and P.A. 78-303 allowed substitution of banking commissioner references for references to Public Deposit Protection Commission, effective January 1, 1979; (Revisor’s note: Pursuant to P.A. 87-9 “banking commissioner” was changed editorially by the Revisors to “commissioner of banking”); P.A. 91-245 deleted existing Subsecs. (a) and (b), added new Subsec. (a) re eligible collateral requirements, added new Subsec. (b) re segregation of eligible collateral, added notice requirements to Subsec. (c), made a technical change to Subsec. (d) and added Subsec. (e) re minimum market value for eligible collateral; P.A. 94-122 made technical changes, effective January 1, 1995; Sec. 36-386 transferred to Sec. 36a-333 in 1995; P.A. 95-155 added provisos in Subsec. (b) re location of the trust department and location at which eligible collateral is maintained, effective June 27, 1995; P.A. 03-196 added Subsecs. (a)(5) re collateral requirement for uninsured bank and (a)(6) re collateral requirement for depository that is subject to order to cease and desist, or has entered into a stipulation and agreement, or a letter of understanding and agreement with a bank or credit union supervisor, effective July 1, 2003; P.A. 04-136 amended Subsec. (a)(5) to delete reference to Sec. 36a-70(t)(1), effective May 12, 2004; P.A. 05-39 amended Subsec. (a) to provide that amount of all public deposits held by the qualified public depository shall be determined based on amount of public deposits reported on most recent written report filed with commissioner pursuant to Sec. 36a-338, in lieu of amount reported on most recent quarterly call report, effective May 17, 2005; P.A. 06-10 amended Subsec. (c) to provide that depository has authority to reduce amount of eligible collateral maintained under Subsec. (a) provided such reduction is determined based on amount of all public deposits held by depository and its risk-based capital ratio, effective May 2, 2006; P.A. 11-50 amended Subsec. (a) to add provisions re consent order, preliminary warning letter and memorandum of understanding and to replace provision re determining amount of all public deposits based on either deposits reported on most recent written report or average of deposits reported with provision re determining amount of all public deposits at close of business on day deposits are received, effective June 13, 2011; P.A. 12-96 amended Subsec. (a) by adding references to “uninsured” re public deposits, requirements re qualified public depository that satisfies requirements of Subsec. (f), references to “subdivision (6)” and provisions re determining minimum market value of eligible collateral and by making conforming changes, amended Subsec. (c) to add “uninsured” re public deposits and added Subsec. (f) re qualified public depository subject to cease and desist order, consent order or preliminary warning letter or that has entered into a stipulation and agreement, memorandum of understanding or letter of understanding and agreement, effective June 8, 2012.