{"data":{"id":"us-ky/krs-41.240","jurisdiction":"us-ky","citation":"KRS 41.240","heading":"Pledge of collateral required of state depositories -- Qualifications for a","body":"reduced pledge -- Eligible securities and other obligations.\n(1) (a) Before any bank shall be named as a state depository to receive public funds,\nit shall either pl edge or provide to the State Treasurer collateral having an\naggregate current face value or current quoted market value at least equal to\nthe deposits as of the last business day of each quarter in which funds are so\ndeposited or provide to the State Treas urer a surety bond or surety bonds in\nfavor of the State Treasurer in an amount at least equal to the deposits, as of\nthe last business day of each quarter in which funds are deposited; provided,\nhowever, that amounts insured by the Federal Deposit Insuran ce Corporation\nor the Federal Savings and Loan Insurance Corporation need not be so\ncollateralized. The president or an executive officer of each state depository\nshall submit to the Treasurer and the State Investment Commission a\nstatement subscribed and sworn to by the president or executive officer\nshowing:\n1. The face value or current quoted market value of the securities or other\nobligations pledged as collateral; and\n2. The value of surety bonds provided as of the time such surety bonds are\nprovided as collateral.\nThe aggregate valuation of all pledged or provided collateral shall be reported\nto the State Treasurer and State Investment Commission by the state\ndepository within ten (10) days of the close of each quarter after the date of\ndeposit. Such value with respect to pledged collateral other than surety bonds\nshall be as of the end of the quarter or the preceding business day and, as to\nsurety bonds, the market values shall be obtained from a reputable bond -\npricing service. The State Treasurer and  Governor may from time to time call\nfor additional collateral to adequately secure the deposits as aggregate face or\ncurrent market values may require, if the value of collateral is not compliant\nwith state law as of the report date.\n(b) No deposit of sta te funds shall collectively exceed at any time the state\ndepository's sum of capital, reserves, undivided profits and surplus or ten\npercent (10%) of the total deposits of the state depository, whichever is less.\nFor purposes of this subsection only, the v alue of the state deposit will be\ndetermined as of the end of the last business day of each quarter that funds are\ndeposited.\n(2) (a) As an alternative to subsection (1)(a) of this section, a state depository insured\nby the Federal Deposit Insurance Corpor ation may either pledge to the State\nTreasurer, as collateral, securities or other obligations having an aggregate\nface value or a current quoted market value or provide to the State Treasurer a\nsurety bond or surety bonds in an amount equal to eighty perc ent (80%) of the\nvalue of the state deposit including demand and time accounts, if the state\ndepository is determined by the State Investment Commission to have very\nstrong credit with little or no credit risk at any maturity level and the\nlikelihood of sh ort-term unexpected problems of significance is minimal or\nnot of a serious or long -term nature. The value of the state deposit will be\ndetermined at the end of the business day of deposit and as of the end of\nbusiness on the last day of each quarter that funds are so deposited.\n(b) Valuation of all pledged or provided collateral shall be reported to the State\nTreasurer and the State Investment Commission within ten (10) days of the\nclose of each quarter after the date of deposit.\n(c) State depositories des ignated as qualified for reduced pledging shall be so\nrecorded in the executive journal.\n(d) The State Investment Commission shall determine eligibility for the reduced\npledging option based on totally objective and quantifiable measures of\nfinancial intermediary performance. The information for such eligibility shall\nbe obtained from publicly available documents. The State Investment\nCommission shall promulgate the particular criteria of eligibility by\nregulations issued pursuant to KRS Chapter 13A.\n(3) State depositories which do not qualify or do not choose to qualify under subsection\n(1) or (2) of this section shall not receive state deposits in excess of amounts that\nare insured by an instrumentality of the United States.\n(4) Only the following securiti es and other obligations may be accepted by the State\nTreasurer as collateral under this section:\n(a) Bonds, notes, letters of credit, or other obligations of or issued or guaranteed\nby the United States, or those for which the credit of the United States is\npledged for the payment of the principal and interest thereof, and any bonds,\nnotes, debentures, le tters of credit, or any other obligations issued or\nguaranteed by any federal governmental agency or instrumentality, presently\nor in the future established by an Act of Congress, as amended or\nsupplemented from time to time, including, without limitation,  the United\nStates government corporations listed in KRS 66.480(1)(c);\n(b) Obligations of the Commonwealth of Kentucky including revenue bonds\nissued by its statutory authorities, commissions, or agencies;\n(c) Revenue bonds issued by educational institutio ns of the Commonwealth of\nKentucky as authorized by KRS 162.340 to 162.380;\n(d) Obligations of any city of the Commonwealth of Kentucky, or any county, for\nthe payment of principal and interest on which the full faith and credit of the\nissuing body is pledged;\n(e) School improvement bonds issued in accordance with the authority granted\nunder KRS 162.080 to 162.100;\n(f) School building revenue bonds issued in accordance with the authority\ngranted under KRS 162.120 to 162.300, provided that the issuance of su ch\nbonds is approved by the Kentucky Board of Education;\n(g) Surety bonds issued by sureties rated in one (1) of the three (3) highest\ncategories by a nationally recognized rating agency;\n(h) Letters of credit issued by federal home loan banks; and\n(i) Real property owned by the bank.","path":["KRS Chapter 41"],"source_url":"https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=51351","current_through":"Includes enactments through the 2026 Regular Session","vintage":"09/05/2026","retrieved_at":"2026-09-05T20:49:00Z","sha256":"a7cd961284e3e226b796cda8753647732e683c4292edb2c7d255ac5dbedd61be","source_id":"us-ky","stale":false,"prev":"us-ky/krs-41.230","next":"us-ky/krs-41.245"},"notice":"GroundRules: Original legal text. Not legal advice."}