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2008 Banking Update Upcoming Changes in Collateralization

2008 Banking Update Upcoming Changes in Collateralization. Current Responsibilities and Procedures HB 2901’s Revisions to ORS 295 (landru.leg.state.or.us/07reg/measpdf/hb2900.dir/hb2901.en.pdf) New Structure Effective July 1, 2008. 2. Current System. State Treasury. Bank. Depositors.

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2008 Banking Update Upcoming Changes in Collateralization

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  1. 2008 Banking Update Upcoming Changes in Collateralization Mark M. Farrell, KeyBank Public Sector Group OMFOA/OACTFO Conference Spring 2008 Phone (503) 790-7543

  2. Current Responsibilities and Procedures • HB 2901’s Revisions to ORS 295 • (landru.leg.state.or.us/07reg/measpdf/hb2900.dir/hb2901.en.pdf) • New Structure Effective July 1, 2008 2

  3. Current System State Treasury Bank Depositors COP COP COP Pool Manager Collateral = 25%/110% of Total COP’s 3

  4. Revisions to ORS 295 • Current System • Depositor must request COP • Depositor verifies that bank is a qualified depository (www.ost.state.or.us/divisions/finance/qualifieddepositoriespublicfunds.htm) • No notice by depositor to State Treasury of its depository banks • Collateral traditionally based on estimated peak balances • New System • No COP’s – reduced paperwork and administration • Depositor verifies that bank is a qualified depository • Depositor required to notify State Treasury of its depository banks and of local contact • Collateral based on actual balances 4

  5. Revisions to ORS 295 (cont.) • Current System • Depositor responsible for maintaining adequate collateral - potential personal liability for public officials • Banks pledge 25% collateral (110% if required by State Treasury) • A bank’s collateral secures its depositors only • A bank is not responsible for another bank’s performance • New System • Banks report public deposits quarterly to State Treasury –eliminates some personal liability for public officials • Banks pledge 10% collateral if well capitalized, 25% if adequately capitalized, 110% if undercapitalized • All banks’ collateral is pooled and secures all depositors of a bank incurring a loss • To the extent the collateral pool is inadequate to cover a loss, all banks are responsible pro rata for the shortfall 5

  6. New System State Treasury Bank A Bank B Bank C Pool Manager Collateral = 10%/25%/ 110% of Deposits Pool Manager Collateral = 10%/25%/ 110% of Deposits Pool Manager Collateral = 10%/25%/ 110% of Deposits Collateral Pool 6

  7. Mark M. Farrell Senior Relationship Manager Public Sector Group 1211 SW Fifth Avenue, Suite 400 Mailcode: OR-20-21-0444 Portland, OR 97204 Tel: 503.790.7543 Fax: 503.790.7574 mark_m_farrell@keybank.com Mark S. Hudspeth Senior Vice President Public Sector Group 1211 SW Fifth Avenue, Suite 400 Mailcode: OR-20-21-0444 Portland, OR 97204 Tel: 503.790.7682 Fax: 503.790.7574 mark_s_hudspeth@keybank.com • Handouts • Questions? • Contacts: 7

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