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Program Overview

Under existing Texas law, a depository institution must pledge security to collateralize deposits of public funds by a public entity in excess of federal deposit limits. The current system requires that each public entity's deposits be collateralized individually, even if a depository institution holds deposits from several different public entities. The new Pooled Collateral Program provides an alternative to the current system by allowing a depository institution to pool collateral for public entities, and requires the Comptroller to regulate and monitor the Program. Under this Program, the Comptroller ensures that the securities pledged as collateral have a market value greater than the deposits.

Benefits

The Pooled Collateral Program will continue to safeguard deposits of public funds, allow greater efficiency, and reduce costs to both local public entities and depository institutions.

The Pooled Collateral Program is designed to produce benefits for both depository institutions and local public entities. Depository institutions will be able to centralize the processing and management of all pledging and maintenance of collateral through the state rather than with each entity. They will be able to better manage fluctuations with an aggregate collateral requirement than with many separate fluctuations among many separate pledge arrangements. They will be able to report to a single state entity instead of multiple entities, as well as report electronically.

Public entities may save time by allowing the Comptroller to manage and, together with the public entity, monitor collateral for their public funds. Under the program, the Comptroller will provide daily market pricing of all collateral and publish easily accessible reports on its Web site.

There is no cost to the public entity for participating.

Comptroller's Role

The Pooled Collateral Program operates as a viable alternative to the individual collateralization of local public funds. Texas law requires public entities depositing funds with depository institutions in excess of federal insurance limits to receive a pledge of securities, and to ensure that the securities pledged as collateral have a market value greater than the deposits.

The Comptroller will assume the role of ensuring that all public deposits in the Pooled Collateral Program have a pledge of securities from a depository institution, and that this collateral has a market value greater than the public deposits. In this role, the Comptroller will establish guidelines for program participation, act as a central repository for reporting and information, enforce penalties as needed, and assess fees to cover the costs of administering the program.

For Further Information

If you have any questions about the Pooled Collateral Program, please feel free to contact our staff at (800) 531-5441, extension 3-6069 or 3-5902, or you may dial directly at (512) 463-6069 or (512) 463-5902.

You may also email any questions to:

collateral@cpa.state.tx.us

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