Establishes the savings bank, savings and loan association or credit union municipal deposit program.

---

S3942-2011 Actions

• Jan 4, 2012: REFERRED TO LOCAL GOVERNMENT
• May 25, 2011: REPORTED AND COMMITTED TO BANKS
• Mar 10, 2011: REFERRED TO LOCAL GOVERNMENT

S3942-2011 Meetings

Local Government: May 25, 2011

S3942-2011 Votes

S3942-2011 Memo

BILL NUMBER:S3942

TITLE OF BILL:
An act
to amend the general municipal law
and the banking law, in relation to
the establishment of a
savings bank, savings and loan association or
credit union municipal deposit
program, and limiting deposits of public funds in such
institutions to two hundred fifty thousand
dollars

PURPOSE:
To allow savings banks, savings and loan associations and
federal savings banks to accept deposits from municipalities.

SUMMARY:
Section 1 changes the definition of "bank" to include credit
unions, or federal credit unions, savings banks and savings & loan
associations.

Section 2 adds accepting deposits from a local government to the
general powers of a credit union.

Section 3 requires credit unions to pledge assets or furnish other
security for deposits accepted from local governments, and limits
receipt of municipal deposits to $250,000.

Section 4 removes restrictions on savings banks from accepting
deposits from a local government.

Section 5 requires savings banks to pledge assets or furnish other
security for deposits accepted from local governments.

Section 6 requires savings and loan associations to pledge assets or
furnish other security for deposits accepted from local governments.

Section 7 sets forth the effective date of 90 days.

CURRENT LAW:
Under current law, only commercial banks and trust
companies are allowed to accept municipal deposits.

JUSTIFICATION:
The current law restricting municipal deposits to
commercial banks is an anachronism, stemming from the days when
commercial banks were the most secure option for these types of
investments.
At that time, savings banks, savings & loan associations and credit
unions, were smaller, less secure entities that primarily served
individual investors by providing investment opportunities and
offering loans, particularly mortgages to residents of the
communities they served. However, savings banks, savings & loan
associations and credit unions are now on par, with commercial banks
in many of the services


they provide as well as the security they offer to their investors.
Allowing savings banks, savings & loans and credit unions to accept
municipal deposits would be beneficial to the communities they are
serving by offering a competitive alternative to commercial banks,
who are often a large corporate entity with no real affiliation or
commitment to the community they serve.

PRIOR LEGISLATIVE HISTORY:
A.11538-C Rules (2010)

FISCAL IMPLICATIONS:
None to the State.

EFFECTIVE DATE:
On the 60th day after becoming law.

S3942-2011 Text

                      S T A T E   O F   N E W   Y O R K
  ________________________________________________________________________

                                    3942

                         2011-2012 Regular Sessions

                              I N  SENATE

                               March 10, 2011
                                 ___________

  Introduced  by  Sen. MARTINS -- 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  banking  law,  in
    relation  to  the  establishment  of  a savings bank, savings and loan
    association or credit union municipal deposit  program,  and  limiting
    deposits  of  public  funds  in such institutions to two hundred fifty
    thousand dollars

    THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
  BLY, 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 ASSO-
  CIATION'S, CREDIT UNION'S, or trust company's account agreement or poli-
  cies.
    S 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
  FEDERALLY-CHARTERED 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.

   EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                        [ ] is old law to be omitted.
                                                             LBD01445-03-1

 S. 3942                             2

    K. "SAVINGS AND LOAN ASSOCIATION" SHALL MEAN A SAVINGS AND LOAN  ASSO-
  CIATION  AS  DEFINED  BY SUBDIVISION EIGHT OF SECTION TWO OF THE BANKING
  LAW OR ANY FEDERAL SAVINGS AND LOAN ASSOCIATION.
    S 3.  Subdivisions 2 and 4 of section 10 of the general municipal law,
  as  amended  by  chapter 623 of the laws of 1998, are amended to read as
  follows:

    2. a. 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  disposi-
  tion  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 speci-
  fy the maximum amount which may be kept on deposit at any time  in  each
  such  bank,  SAVINGS BANK, SAVINGS AND LOAN ASSOCIATION, CREDIT UNION 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 COMP-
  TROLLER  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.
    b.  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 SHALL BE LIMITED TO TWO HUNDRED AND
  FIFTY THOUSAND DOLLARS.
    C.  Except as otherwise provided by law, all deposits shall be made to
  the credit of the local government.  The deposit of public funds  pursu-
  ant 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.]  D. The governing board of a local government, in which a banking
  development district has been designated by the superintendent of  banks
  pursuant  to  section  ninety-six-d  of the banking law, may designate a
  bank, 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 offi-
  cer 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  deposi-
  tories.    Such resolution shall specify the maximum amount which may be
  kept on deposit at any time with such bank, trust  company  or  national
  bank  located  in  such district.   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.
    4. (a) Notwithstanding any other provision of law to the contrary, the
  chief fiscal officer, or other officer authorized by law to make  depos-
  its,  may,  subject  to  the  approval  of the governing body of a local
  government, by resolution, enter into a contract with a courier  service
  for  the  purpose  of  causing  the deposit of public funds with a bank,

 S. 3942                             3

  SAVINGS BANK, SAVINGS AND LOAN ASSOCIATION, CREDIT UNION or trust compa-
  ny as provided in this section.
    (b)  The  entrusting of public funds for deposit pursuant to paragraph
  (a) of this subdivision shall release the officer entrusting the  public
  funds  to  the  courier service and his or her surety from any liability
  for loss of such public funds by the courier service in the  process  of
  delivering  such  public  funds  to  the  designated bank, SAVINGS BANK,
  SAVINGS AND LOAN ASSOCIATION, CREDIT UNION or trust company.
    (c) The local government authorizing the deposit of public funds by  a
  courier  service  pursuant  to  paragraph  (a) of this subdivision shall
  require the courier service to obtain a surety bond for the full  amount
  entrusted  to  the courier, payable to the local government and executed
  by an insurance company authorized to do business  in  this  state,  the
  claims  paying  ability of which is rated in the highest rating category
  by at least two nationally recognized statistical rating  organizations,
  to  insure  against  any  loss  of public funds entrusted to the courier
  service for deposit or failure to deposit the full amount  entrusted  to
  the courier.
    (d)  A deposit made by a courier on behalf of a local government shall
  be deemed to be a deposit made by the  chief  fiscal  officer  or  other
  officer entrusting such funds for purposes of the requirements contained
  in this section for securing public deposits.
    (e)  A  bank, SAVINGS BANK, SAVINGS AND LOAN ASSOCIATION, CREDIT UNION
  or trust company may, from time to time and as agreed upon with a  local
  government, reimburse all or part of, but not more than, the actual cost
  incurred  by  the  local  government  in  transporting  cash, negotiable
  instruments or other items for deposit through a courier service.    Any
  such  reimbursement  agreement  shall  apply only to a specified deposit
  transaction, and may be subject to such terms,  conditions  and  limita-
  tions  as  the  bank, SAVINGS BANK, SAVINGS AND LOAN ASSOCIATION, CREDIT
  UNION or trust company deems necessary to  ensure  sound  banking  prac-
  tices,  including,  but not limited to, any terms, conditions or limita-
  tions that may be required by the banking department or other federal or
  state authority.
    S 4. Subdivision 2 of section 11 of  the  general  municipal  law,  as
  amended  by  chapter  708  of  the  laws  of 1992, is amended to read as
  follows:

    2. The governing board of any local government or,  if  the  governing
  board  so  delegates,  the  chief fiscal officer or other officer having
  custody of the moneys may temporarily invest  moneys  not  required  for
  immediate  expenditure,  except moneys the investment of which is other-
  wise provided for by  law,  in  special  time  INTEREST-BEARING  deposit
  accounts in, or certificates of deposit issued by, a bank, SAVINGS BANK,
  SAVINGS  AND  LOAN ASSOCIATION, OR SHARE CERTIFICATES ISSUED BY A CREDIT
  UNION or trust company located and authorized to  do  business  in  this
  state,  provided  however, that such time deposit account or certificate
  of deposit OR SHARE CERTIFICATE shall be payable within such time as the
  proceeds shall be needed to meet expenditures for which such moneys were
  obtained and provided further that such time deposit account or  certif-
  icate  of  deposit OR SHARE CERTIFICATE be secured in the same manner as
  is provided for securing deposits of public funds by  subdivision  three
  of section ten of this article.
    S  5. The banking law is amended by adding a new section 454-a to read
  as follows:

    S 454-A. DEPOSITS OF PUBLIC MONEY WITH CREDIT  UNIONS;  SECURITY.    A
  CREDIT  UNION MAY ACCEPT DEPOSITS OF PUBLIC MONEY SUBJECT TO THE LIMITA-

 S. 3942                             4

  TIONS PROVIDED IN SECTION TEN OF THE GENERAL MUNICIPAL LAW.  SUCH CREDIT
  UNION SHALL PLEDGE ASSETS OR FURNISH OTHER SECURITY SATISFACTORY IN FORM
  AND AMOUNT TO THE DEPOSITOR, FOR THE REPAYMENT OF  MONIES  HELD  IN  THE
  NAME  OF  SUCH DEPOSITOR, WHEN REQUIRED TO BE SECURED BY APPLICABLE LAW,
  DECREE OR REGULATION.
    S 6. This act shall take effect on the sixtieth  day  after  it  shall
  have become a law.