Kan. Admin. Regs. § 122-2-2

Current through Register Vol. 43, No. 49, December 5, 2024

Section 122-2-2 - Collateral

(a) Each state bank account shall be fully collateralized at all times based on securities, which may be accepted or rejected by the pooled money investment board, under K.S.A. 75-4201(k), and amendments thereto. Such securities shall be priced on a market value basis. The aggregate market value of the securities shall be sufficient to equal the outstanding amount of state funds deposited, plus accrued interest on the state funds, less federal deposit insurance coverage.

(b) The qualified depository institution shall ensure that deposits and accrued interest are always sufficiently collateralized. Sufficiency of collateral values shall be validated by the treasurer.

(c) Each qualified depository institution depositing securities with a custodial bank shall enter into a written custodial agreement with the custodial bank and the board for the safekeeping of the securities.

(d) Collateral based on corporate surety bonds as provided under K.S.A. 75-4201 shall be subject to the following requirements.

(1) The surety bonds shall be approved by the Kansas commissioner of insurance and shall be in a standard format approved by the treasurer.

(2) The issuer of the surety bond shall be admitted and licensed to issue surety bonds in Kansas.

(3) The treasurer shall be designated as the insured public depositor.

(4) The issuer and the qualified depository institution shall notify the treasurer by certified or registered mail no fewer than 90 days before nonrenewal and no fewer than 45 days before cancellation of a surety bond.

(5) The ability of the issuer to pay claims shall be rated and shall remain rated in the highest rating category of one of the nationally recognized rating agencies, as specified by written policy of the board. Within 48 hours of discovery of a downgrade of an issuer by a rating agency or notice of financial regulatory action by any jurisdiction in which the issuer is licensed, the issuer shall notify the treasurer by certified or registered mail.

(6) The amount of collateral provided in the form of surety bonds by a qualified depository and the amount of total state deposits that may be collateralized in the form of surety bonds shall be limited as provided by written policy of the board.

(7) The issuer shall send quarterly reports to the treasurer, listing all Kansas banks that have purchased a surety bond as collateral for deposits, the insured amount covering deposits of the treasurer, and the total insured amount per qualified depository institution in the state of Kansas, noting the retainage and reinsured amounts for each qualified depository institution.

(e) The following requirements shall apply to collateral based on a letter of credit issued by a United States sponsored enterprise that under federal law may be accepted as security for public funds.

(1) The letter of credit shall be in a format approved by the treasurer.

(2) The treasurer shall be designated as the irrevocable and unconditional beneficiary of the letter of credit.

(3) The issuer and the qualified depository institution shall notify the treasurer by certified or registered mail no fewer than 45 days before cancellation or nonrenewal of a letter of credit.

(4) The securities of the issuer shall be rated, and shall remain rated, in the highest rating category of one of the nationally recognized rating agencies, as specified by written policy of the board. Within 48 hours of discovery of a downgrade of an issuer by a rating agency, the issuer shall give notice to the treasurer by certified or registered mail.

(5) The issuer shall not provide letters of credit for any qualified depository institution in an amount that exceeds 10% of the issuer's capital and surplus.

Kan. Admin. Regs. § 122-2-2

Authorized by K.S.A. 1996 Supp. 75-4232; implementing K.S.A. 75-4201, as amended by L. 1997, Ch. 180, §21 and K.S.A. 1996 Supp. 75-4218, as amended by L. 1997, Ch. 180, §27; effective, T-122-7-27-95, July 27, 1995; effective Nov. 17, 1995; amended Jan. 24, 1997; amended Jan. 16, 1998.