[Federal Register Volume 61, Number 121 (Friday, June 21, 1996)]
[Proposed Rules]
[Pages 31879-31881]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-15900]
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DEPARTMENT OF THE TREASURY
Fiscal Service
31 CFR Part 202
RIN 1510-AA42
Depositaries and Financial Agents of the Federal Government
AGENCY: Financial Management Service, Fiscal Service, Treasury.
ACTION: Proposed rule.
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SUMMARY: This proposes to revise regulations which govern the
designation of Depositaries and Financial Agents of the Federal
Government (depositaries); their authorization to accept deposits of
public money and to perform other specific services; and the securing
of public money. The proposed revisions update, clarify, and simplify
current requirements, but do not change them. Outdated references to
specific acceptable insurers are deleted. Existing language concerning
the types and valuation of acceptable collateral securities and the
authorization for depositaries to perform services other than
acceptance of insured deposits is clarified. In addition, various
references are updated.
DATES: Comments must be submitted on or before August 5, 1996.
ADDRESSES: All comments concerning these proposed regulations should be
addressed to the Cash Management Policy and Planning Division,
Financial Management Service, 401 14th Street, S.W., Room 420,
Washington, DC 20227, Attn. Donald E. Clark.
FOR FURTHER INFORMATION CONTACT: Donald E. Clark, (202) 874-7106
(Financial Program Specialist, Cash Management Policy and Planning
Division) or Cynthia L. Johnson, (202) 874-6590 (Director, Cash
Management Policy and Planning Division).
SUPPLEMENTARY INFORMATION:
Background
Depositaries accepting deposits of public money and providing other
financial agency services to the United States are required to pledge
adequate acceptable securities as collateral, as directed by the
Secretary of the Treasury (Secretary). The Secretary previously
promulgated regulations, codified at 31 CFR part 202, setting forth the
general requirements for designating depositaries and the pledging of
collateral to secure public money held by depositaries.
Since these regulations were last amended, the Secretary has
revised the types and valuations of acceptable collateral for securing
public money referenced in this part. In addition, these regulations
reference the Federal Savings and Loan Insurance Corporation (FSLIC) as
an acceptable insurer of deposits. FSLIC has been abolished.
Summary of Changes
1. Types and Valuation of Acceptable Collateral Securities
The current rule provides that certain identified securities are
acceptable as collateral at face value, unless otherwise specified by
the Secretary. The Secretary has recognized that the use of face value
for managing the level of pledged collateral is problematic because the
true value of a security is rarely the face value, except on the day of
redemption. A common practice of the Federal Reserve bank and United
States Department of the Treasury when valuing collateral is to apply
market discounts, i.e., subtractions, to the value of the collateral to
account for market volatility due to interest rate fluctuations, the
quality of the security pledged, or the financial instability of the
pledging institution. Therefore, since this Part was last amended, the
Secretary has ``otherwise specified'' that certain securities,
including certain of those expressly referenced in the current rule,
are acceptable only at 90% of face value, rather than at 100% of face
value.
Because the Secretary has otherwise specified the types and
valuations of acceptable collateral securities, revision of this part
will eliminate any possible confusion regarding acceptable collateral
security types and valuation under this part. The proposed rule
provides that types and valuation of acceptable collateral securities
will be specified in Treasury procedural instructions. Treasury issued
these procedural instructions to Federal Reserve banks, which
disseminated them to financial institutions pledging collateral under
this Part.
2. Financial Institution Insurers
The current rule provides that eligible banks insured by the
Federal Deposit Insurance Corporation (FDIC) and eligible institutions
insured by FSLIC are designated as depositaries. The proposed rule
deletes references to FSLIC, which has been abolished, and
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provides that eligible financial institutions insured by the FDIC are
designated as depositaries.
3. Authorities
The current rule includes as authorities 12 U.S.C. 1709(a) and 12
U.S.C. 1725(d). The proposed rule corrects a typographical error,
replacing 12 U.S.C. 1709(a) with 12 U.S.C. 1789a, and removes citations
to 12 U.S.C. 1725(d), as that statute has been repealed. In addition,
the proposed rule lists 12 U.S.C. 90 and 12 U.S.C. 391 as additional
applicable authorities. These authorities pertain to national banking
associations and Federal Reserve banks, respectively, as depositaries
when so designated by the Secretary.
4. Depositary Authorization to Perform Services Other than Acceptance
of Insured Deposits
The current rule provides that upon the request of a Federal
agency, the Secretary may authorize a depositary to perform services
(other than the acceptance of Federal or state insured deposits)
specifically requested by the agency, ``including'' various listed
services. The proposed rule deletes references to ``upon the request
of'' and ``specifically requested by'' a Government agency, and revises
the term ``including'' to read ``including, but not limited to'' in
order to clarify Treasury's longstanding interpretation of these
provisions.
5. Disposition of Principal and Interest Payments on Pledged Collateral
after a Depositary is Declared Insolvent
The current rule provides that in the event of a depositary's
insolvency or closure, or in the event of the appointment of certain
officers to terminate its business, the depositary agrees that all
principal and interest payments on any security pledged to protect
public monies due on or after the date of insolvency or closure shall
be held separate and apart from any other assets and be available to
satisfy any claim of the United States. The proposed rule clarifies
Treasury's longstanding interpretation that the term ``any claim of the
United States'' includes claims not arising out of the depositary
relationship for which the collateral was pledged.
6. Additional Administrative Revisions
The proposed rule makes certain administrative revisions necessary
to update existing regulatory language. These administrative revisions
include (1) notification that financial institutions may obtain forms
from Federal Reserve banks; (2) removal of the word ``every'' from
certain listed classes of financial institutions designated as
depositaries, for consistency reasons; (3) removal of references to
Treasury Tax and Loan depositaries governed by 31 CFR part 203
receiving deposits representing payments for certain United States
obligations, as such depositaries are no longer authorized to perform
these functions; (4) revision of references to a depositary's entering
into a ``contract of deposit'' with Treasury to read ``agreement of
deposit,'' in order to reaffirm Treasury's longstanding interpretation
that such agreements are not procurements; (5) updating the address for
Treasury's Financial Management Service; and (6) updating citations to
applicable equal employment opportunity statutes and regulations.
Rulemaking Analysis
Executive Order 12866
It has been determined that this regulation is not a significant
regulatory action as defined in Executive Order 12866. Therefore, a
Regulatory Assessment is not required.
Regulatory Flexibility Act
It is hereby certified pursuant to the Regulatory Flexibility Act
that this revision will not have a significant economic impact on a
substantial number of small business entities. This revision makes no
change to current procedures and only updates, clarifies, and
simplifies the current rule. Accordingly, a Regulatory Flexibility Act
analysis is not required.
Notice and Comment
Public comment is solicited on all aspects of this proposed
regulation. Treasury will consider all comments made on the substance
of this proposed regulation, but does not intend to hold hearings.
List of Subjects in 31 CFR Part 202
Banks, Banking.
For the reasons set out in the preamble, 31 CFR part 202 is
proposed to be amended as follows.
PART 202--DEPOSITARIES AND FINANCIAL AGENTS OF THE FEDERAL
GOVERNMENT
1. The authority citation for part 202 is revised, and the
authority citations at the end of the sections are removed, to read as
follows:
Authority: 12 U.S.C. 90; 12 U.S.C. 265-266; 12 U.S.C. 391; 12
U.S.C. 1464(k); 12 U.S.C. 1789a; 12 U.S.C. 3101-3102.
2. Section 202.1 is revised to read as follows:
Sec. 202.1 Scope of regulations.
The regulations in this part govern the designation of Depositaries
and Financial Agents of the Federal Government (hereinafter referred to
as depositaries), and their authorization to accept deposits of public
money and to perform other services as may be required of them. Public
money includes, but is not limited to, revenue and funds of the United
States, and any funds the deposit of which is subject to the control or
regulation of the United States or any of its officers, agents, or
employees. The designation and authorization of Treasury Tax and Loan
depositaries for the receipt of deposits representing Federal taxes are
governed by the regulations in part 203 of this chapter.
3. Section 202.2 is amended by revising paragraph (a)(1), removing
paragraph (a)(2), by redesignating paragraphs (a)(3) and (a)(4) as
(a)(2) and (a)(3), and by revising redesignated paragraphs (a)(2) and
(a)(3) to read as follows:
Sec. 202.2 Designations.
(a) * * *
(1) Financial institutions insured by the Federal Deposit Insurance
Corporation.
(2) Credit unions insured by the Administrator of the National
Credit Union Administration.
(3) Banks, savings banks, savings and loan, building and loan, and
homestead associations, credit unions created under the laws of any
State, the deposits or accounts of which are insured by a State or
agency thereof or by a corporation chartered by a State for the sole
purpose of insuring deposits or accounts of such financial
institutions, United States branches of foreign banking corporations
authorized by the State in which they are located to transact
commercial banking business, and Federal branches of foreign banking
corporations, the establishment of which has been approved by the
Comptroller of the Currency.
(b) * * *
4. Section 202.3 is amended by revising paragraphs (a), (b)(1)
introductory text, (b)(2), introductory text, and (b)(2)(i) to read as
follows:
Sec. 202.3 Authorization.
(a) To accept deposits covered by the appropriate Federal or State
insurer. Every depositary is authorized to accept a deposit of public
money in an official account, other than an account in the name of the
United States Treasury, in
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which the maximum balance does not exceed the ``Recognized Insurance
Coverage.'' ``Recognized Insurance Coverage'' means the insurance
provided by the Federal Deposit Insurance Corporation, the National
Credit Union Share Insurance Fund, and by insurance organizations
specifically qualified by the Secretary of the Treasury.
(b) To perform other services. (1) The Secretary of the Treasury
may authorize a depositary to perform other services including, but not
limited to: * * *
(2) To obtain authorization to perform services, a depositary must:
(i) File with the Secretary of the Treasury an appropriate
agreement and resolution of its board of directors authorizing the
agreement (both on forms prescribed by the Financial Management Service
and available from Federal Reserve banks), and
* * * * *
5. Section 202.4 is amended by revising introductory text and
paragraphs (c), (d), and (e) to read as follows:
Sec. 202.4 Agreement of deposit.
A depositary which accepts a deposit under this part enters into an
agreement of deposit with the Treasury Department. The terms of this
agreement include:
* * * * *
(c) The provisions prescribed in Executive Order 11246, entitled
``Equal Employment Opportunity,'' as amended by Executive Orders 11375
and 12086, and regulations issued thereunder at 41 CFR Chapter 60, as
amended.
(d) The requirements of section 503 of the Rehabilitation Act of
1973, as amended, and the regulations issued thereunder at 41 CFR part
60-741, requiring Federal contractors to take affirmative action to
employ and advance in employment qualified individuals with
disabilities.
(e) The requirements of section 503 of the Vietnam Era Veterans'
Readjustment Assistance Act of 1972, as amended, 38 U.S.C. 4212,
Executive Order 11701, and the regulations issued thereunder at 41 CFR
parts 60-250 and 61-250, requiring Federal contractors to take
affirmative action to employ and advance in employment qualified
special disabled and Vietnam Era veterans.
6. Section 202.6 is amended by revising paragraphs (b) and (e)(1)
to read as follows:
Sec. 202.6 Collateral security.
* * * * *
(b) Acceptable security. Types and valuations of acceptable
collateral security will be specified by the Secretary of the Treasury
in Treasury procedural instructions.
* * * * *
(e) Disposition of principal and interest payments of the pledged
securities after a depositary is declared insolvent--(1) General. In
the event of the depositary's insolvency or closure, or in the event of
the appointment of a receiver, conservator, liquidator, or other
similar officer to terminate its business, the depositary agrees that
all principal and interest payments on any security pledged to protect
public monies due as of the date of the insolvency or closure, or
thereafter becoming due, shall be held separate and apart from any
other assets and shall constitute a part of the pledged security
available to satisfy any claim of the United States, including those
not arising out of the depositary relationship.
* * * * *
7. Section 202.7 is amended by revising paragraph (a) to read as
follows:
Sec. 202.7 Maintenance of balances within authorizations.
(a) Government agencies shall contact the Department of the
Treasury, Financial Management Service, before making deposits with a
financial institution insured by a State or agency thereof or by a
corporation chartered by a State for the sole purpose of insuring
deposits or accounts. The contact should be directed to the Cash
Management Policy and Planning Division, Federal Finance, Financial
Management Service, Department of the Treasury, Washington, DC 20227.
* * * * *
Dated: June 14, 1996.
Russell D. Morris,
Commissioner.
[FR Doc. 96-15900 Filed 6-20-96; 8:45 am]
BILLING CODE 4810-35-P
