Oregon State Treasury

Ted Wheeler OREGON STATE TREASURER

Public Funds Collateralization Program

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Overview

ORS Chapter 295 governs the collateralization of Oregon public funds and provides the statutory requirements for the Public Funds Collateralization Program (PFCP). Depositories are required to pledge collateral against any public funds deposits in excess of deposit insurance amounts. This provides additional protection for public funds in the event of a depository failure or loss. ORS 295 sets the specific value of the collateral, as well as the types of collateral that are acceptable. ORS 295 creates a shared liability structure for participating depositories, better protecting public funds though still not guaranteeing that all funds are 100% protected.

Depositories

The Oregon State Treasury (OST) uses an internally-developed web application to administer the Public Funds Collateralization Program and facilitate depository, custodian and public official compliance with ORS 295.

All depositories are required to report quarterly to the PFCP, providing statutorily-required information including public funds balances in excess of insurance limits, total public funds on deposit, depository net worth, and capitalization information. Depositories are categorized as well capitalized, adequately capitalized or undercapitalized, based on information they provide during their quarterly regulatory reporting process. Well capitalized depositories will typically report updated information on a monthly basis. Depositories that are adequately or undercapitalized will report updated information on a weekly basis. Well capitalized depositories may also be asked to report weekly in some cases. The PFCP web application calculates, based on this information, each depository’s minimum collateral required, which is the market value of securities that must be pledged with the custodian for the next period (week or month, depending on the reporting requirement).

A depository that is well capitalized, as assigned by their regulatory authority, is required to pledge securities (“collateral”) with a total market value equal to at least 10% of their last-reported uninsured public funds deposits, unless otherwise directed by the Oregon State Treasury PFCP. The Oregon State Treasury, in consultation with the Department of Consumer and Business Services, may at any time require well capitalized depositories to pledge additional securities valued at up to 110% of their last-reported uninsured public funds deposits. Adequately capitalized and undercapitalized depositories are required by ORS 295 to pledge collateral valued at 110% of their uninsured public fund deposits. Depositories that are pledging collateral at 110% are required to report uninsured public funds balances on a weekly basis to ensure funds are collateralized at the appropriate level.

ORS 295.046 and 295.048 identify instances where a portion of a depository’s uninsured public funds balance would be required to be collateralized at 100%. When these exceptions are triggered, the PFCP web application automatically calculates the additional collateral required and alerts program and depository staff.

The public website of the Oregon State Treasury provides a list of all “qualified depositories,” the term used to indicate that a depository is an approved member of the PFCP and has agreed to meet all statutory and program requirements. Any public official planning to deposit funds in excess of federal insurance coverage amounts is required by ORS 295 to deposit with a qualified depository. In order to be listed on the qualified depository list, a depository must complete all steps necessary to be accepted as a member of the Public Funds Collateralization Program. An initial step is the execution of a pledge agreement between the depository, the Oregon State Treasury PFCP, and the program’s custodian. This agreement legally obligates the depository to compliance with the requirements of ORS 295 and any rules established by the Oregon State Treasury PFCP.

The PFCP web application has been structured to provide a straightforward and uncomplicated way for depositories to provide required reports and request security pledges and releases. Through the PFCP web application, depositories may enter and review weekly/monthly and quarterly reporting, view current and past maximum liability and minimum collateral requirement balances, request security pledges and releases, and view past requests and reports.

Local Governments

Public officials are required to verify that deposit accounts in excess of deposit insurance limits are only maintained at financial institutions included on the list of qualified depositories found here.  Public officials are also required to report at least annually, or within 3 days of a change, the depositories they do business with, and provide current contact information for the public official. To report a new depository relationship or the termination of a relationship, contact the Oregon State Treasury PFCP at 503-378-3400 or public.funds@ost.state.or.us.

Per ORS 295.056, “when public funds deposits are made in accordance with ORS 295.001 to 295.108, a public official may not be held liable for any loss of public funds that results from the failure or default of any depository without fault or neglect on the public official’s part or on the part of the public official’s officers or employees.”  The Oregon State Treasury PFCP has been designed to address the requirements of ORS 295.001 to 295.108, and compliance with program requirements such as the ones noted above allows a public official the protection afforded by ORS 295.056.

Custodian 

The custodian holds securities pledged by each qualified depository. Through the PFCP web application, depositories can request approval to pledge or release securities from their custodian account. Requests that meet relevant statutory and program requirements are approved by PFCP staff. Once approval is given, the PFCP web application alerts the custodian that they are cleared to take the action requested by the depository. By controlling the pledge and release of securities, the Oregon State Treasury PFCP ensures that all pledged securities meet the requirements of ORS 295 and the release of a security does not bring the depository’s collateral value below their minimum collateral requirement.