Compliance Bulletin

Collateral Requirement for State Deposits Eased
October 9, 2017

A new bill, SB 363, decreases from 110% to 100% the value of collateral that a bank needs to pledge for state deposits if the collateral is a Federal Home Loan Bank (FHLB) letter of credit. The state Treasurer’s office considers FHLB letters of credit to have high credit quality and has come to prefer to take them as collateral when placing deposits with a bank. Under existing state law banks are required to pledge various forms of collateral in the amount of 110% of the amount of state deposits taken. This bill lowers the percentage for letters of credit issued by a FHLB, and preserves the current distinction between letters of credit issued by the SF FHLB and other regional FHLBs.

 See CBA’s Regulatory Compliance Bulletin for more information.