Section 892-X-1-.04 - Collateral Pledging Levels (Alabama Administrative Code)

§ 892-X-1-.04. Collateral Pledging Levels

(1) The financial condition of each QPD shall be reviewed to determine Collateral Pledging Levels for entry and continued participation in the SAFE Program. The review shall be for the purposes of the SAFE Program only and shall be used exclusively for the Program. The review shall include:

(a) An independent financial condition evaluation from a nationally recognized service, published quarterly. Such financial evaluation may be proprietary and not released as public information;

(b) Other pertinent information relating to the overall financial condition of the QPD.

(2) Each QPD shall pledge to the Treasurer Eligible Collateral equal to or in excess of its Required Collateral. One of the following Collateral Pledging Levels shall be used in determining Required Collateral:

(a) 70 percent of the net average daily ledger balance of public deposits if the QPD maintains an independent financial evaluation of 70 or more.

(b) 80 percent of the net average daily ledger balance of public deposits if the QPD maintains an independent financial evaluation of 40 - 69.

(c) 90 percent of the net average daily ledger balance of public deposits if the QPD maintains an independent financial evaluation of 20 - 39.

(d) 100 percent of the net average daily ledger balance of public deposits if the QPD maintains an independent financial evaluation below 10 - 19.

(e) 115 percent of the net average daily ledger balance of public deposits if the QPD maintains an independent financial elevation below 10.

(f) 150 percent of an established maximum amount of public deposits may be required if a QPD experiences significant financial deterioration or at Board discretion.

(g) 100 percent of the net average daily ledger balance of public deposits in the case of a newly established bank. This pledging level will be updated upon receipt of first financial evaluation.

(h) 5 percentage points will be added to any of the above levels if the QPD exhibits one or both of the following conditions:

1. Net average daily ledger balance of public deposits exceeds Tier 1 capital;

2. Net average monthly ledger balance of public deposits comprises 20% or more of total public deposits held in all QPD's.

(i) A QPD may be required to pledge at a higher level for repeated violations of the SAFE Program provisions and rules upon the discretion of the Board.

(j) Minimum required collateral of $100,000.

(3) If a QPD maintains an independent financial evaluation below 10, the following actions may be deemed appropriate:

(a) Additional monthly reporting, including financial information and a listing of all public deposits;

(b) Collateral safe kept in a Treasurer-Designated Custodian name.

(4) The SAFE Board shall review, monitor, and modify these guidelines as necessary to meet the changing needs of the SAFE Program. The Treasurer shall notify each QPD of any changes as they occur.

(New Rule: Filed March 28, 2001; effective May 2, 2001. Amended: Filed September 19, 2002; effective October 24, 2002. Amended: Filed December 20, 2004; effective January 24, 2005. Amended: Filed August 20, 2008; effective September 24, 2008. Amended by Alabama Administrative Monthly Volume XXXV, Issue No. 04, January 31, 2017, eff. March 4, 2017.)

Rule, Eligible Collateral was repealed and Rule 892-X-1-.05 was renumbered to 892-1-.04 as per certification filed September 19, 2002; effective October 24, 2002.

Author: Daria S. Story, SAFE Division, Office of State Treasurer

Statutory Authority: Code of Ala. 1975, §§ 41-14 A-5, 41-14A-6, as amended.

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