N.M. Admin. Code § 2.60.17.8

Current through Register Vol. 35, No. 23, December 10, 2024

Section 2.60.17.8 - COLLATERALIZATION REQUIREMENTS

A. The investment officer shall require collateral levels to be maintained for all institutions (within each classification) in accordance with the following schedule for both new deposits and reinvestments of existing deposits. These rules will become effective five (5) days after filing with the records center and archives commission.

(1) CLASS A. A bank in this classification shall be required to maintain collateral at the statutory minimum level set forth in Section 6-10-17 NMSA 1978 or Section 7-27-5.2 NMSA 1978 [repealed], as applicable. Collateral in the form of securities shall have an aggregate market value equal to 50 percent of the amount of deposit. Collateral in the form of mortgages shall have an aggregate outstanding principal balance equivalent to 120 percent of the amount of the initial deposit, and shall be maintained at a minimum of an aggregate outstanding principal balance equivalent to 100 percent of the amount of the deposit.

(2) CLASS B. A bank in this classification shall be required to maintain collateral in the form of securities with an aggregate market value equal to 75 percent of the amount of deposit, or collateral in the form of mortgages with an aggregate outstanding principal balance equivalent to 120 percent of the amount of the initial deposit.

(3) CLASS C. A bank in this classification shall be required to maintain collateral in the form of securities with an aggregate market value equal to 100 percent of the amount of the deposit, or collateral in the form of mortgages with a minimum aggregate outstanding principal balance equivalent to 120 percent of the amount of the deposit.

(4) CLASS D. A bank in this classification shall be required to maintain collateral in the form of securities with an aggregate market value equal to 100 percent of the amount of the deposit, or collateral in the form of mortgages with an aggregate outstanding principal balance equivalent to 120 percent of the amount of the deposit. The investment officer may, at his discretion, require the pledging of additional mortgage collateral (up to 200 percent of the outstanding principal balance), or additional securities with an aggregate market value equal to 120 percent of the amount of the deposit, to prevent the loss of public funds.

B. A newly chartered bank shall be considered as having class A collateral requirement for the first year of operation, and in its second year of operation, the bank shall annualize its net operating income beginning with the first quarter of the second year for the purpose of calculating ratios pursuant to this Subsection [now 2.60.17.8 NMAC].

C. FDIC insurance will not be counted as collateral unless the bank is willing to certify quarterly, in writing, the insurance amount after prorating other state accounts, including agency accounts.

D. If a bank is unable to meet the collateral level required by its financial classification, the state investment officer may make withdrawals of deposits to the amount which can be collateralized at an appropriate level, as specified above. The increased collateral levels shall be required until the ratios of the institution return to a level which allows an upgrade in classification (as determined by the risk assessment ratios of the bank). The collateral levels shall be governed by the policy in effect at the time of deposit or reinvestment of a certificate of deposit.

E. Any qualifying bank that fails to maintain the pledge of qualifying collateral or other security for deposits, or fails to substitute or provide additional qualifying collateral or security when requested by the state investment officer is subject to a penalty by the director of the financial institutions division, of the commission on banking for New Mexico, of up to one hundred dollars ($100) a day for each two hundred and fifty thousand dollars ($250,000) deposited for each day the violation continues. The state investment officer may also take any other action as deemed necessary to secure state deposits.

F. In making the decision to accept or reject collateral, the state investment office and the treasurer's office reserves the right to reject, either at the time of submission or at any time thereafter, any collateral that does not meet all statutory criteria and any collateral not of sufficient quality to protect the state's interests.

G. Depository institutions are to provide to the state investment office a complete audit of all mortgage collateral by an outside certified public accountant, using generally accepted auditing standards, to ensure that all requirements of the depository and custodial agreements, state law, these regulations and any other pertinent regulations have been met. Audits will be performed annually, or more frequently as requested by the state investment officer. Specific guidelines for the required audit of all mortgage collateral will be developed by the state investment office.

N.M. Admin. Code § 2.60.17.8

Recompiled 10/1/01