Ga. Comp. R. & Regs. R. 80-7-1-.11 - Pledged Assets

(1) Pledged Assets requirement, valuation, approved depositories -

A foreign bank licensed to establish and maintain a Georgia state branch or Georgia state agency shall be required to pledge to the Department money and securities (the "pledged assets") in an aggregate amount as specified in this Rule. The pledged assets shall be valued at the lower of the then amortized cost amount or the then current fair value, and shall consist of permitted pledged assets. The pledged assets shall be deposit obligations of, or assets custodied with, a state or federal FDIC-insured depository not affiliated with the foreign bank and with a primary or branch office located in Georgia (each such institution being referred to in these rules as an "approved depository").

(2) Permitted Pledged Assets. Permitted pledged assets shall consist of and be limited to the following:

(a) United States dollar deposits at one or more FDIC-insured depositories not affiliated with the foreign bank and with a primary or branch office located in Georgia, provided that in any case where the deposited amounts exceed or may exceed the then applicable limits of FDIC insurance (as aggregated in accordance with FDIC rules), the depository has an adequate capacity to meet financial commitments for the uninsured deposit exposure. A depository has an adequate capacity to meet financial commitments if the risk of failure of the depository is low and the full and timely repayment of deposit principal and interest is expected. The foreign bank must analyze, support and document (in English) the adequate capacity of a depository as required by this paragraph and make that documentation available for review by the Department;

(b) Bonds, notes, debentures, or other legally created, general obligations of a state, an agency or political subdivision of a state, the United States, or an instrumentality of the United States;

(c) Securities that this state, an agency or political subdivision of this state, the United States, or an instrumentality of the United States has unconditionally agreed to purchase, insure, or guarantee;

(d) Certificates of deposit, payable in the United States, and banker's acceptances, provided that, in each case, the issuer has an adequate capacity to meet financial commitments for the projected life of the asset or exposure. An issuer has an adequate capacity to meet financial commitments if: (i) the obligation is fully insured by the FDIC in accordance with FDIC rules; or (ii) the risk of default by the obligor is low and the full and timely repayment of principal and interest is expected. For obligations not fully insured by the FDIC in accordance with FDIC rules, the foreign bank must analyze, support and document (in English) the adequate capacity of an issuer and make that documentation available for review by the Department. Each certificate of deposit or bankers' acceptance must be issued by an unaffiliated depository institution or a United States office of an unaffiliated foreign bank;

(e) Repurchase agreements;

(f) Commercial paper, provided such paper is accorded the highest or second highest rating of a NRSRO, and further provided that the commercial paper of any one issuer or group of affiliated issuers shall not constitute more than 10% of the pledged assets and that the total of all commercial paper shall not constitute more than 25% of the pledged assets at any one time. In the event that an issue of commercial paper is rated by more than one NRSRO, it must have the highest or second highest rating of each.

(3) Amount of Pledged Assets. Except as provided for highly rated foreign banks in Rule 80-7-1-.12, the aggregate amount of pledged assets for each Georgia state branch or Georgia state agency established and operating under O.C.G.A. § 7-1-1123 shall be not less than the greater of:

(a)

(i) That amount of capital which would be required of a Georgia state bank under O.C.G.A. § 7-1-410; or

(ii) One percent of the total liabilities of such Georgia state branch or Georgia state agency, including acceptances, but excluding accrued expenses and amounts due and other liabilities to affiliates, offices, branches, agencies, and subsidiaries of such foreign bank. This amount shall be calculated based on the average total liabilities for the previous calendar month of such Georgia state branch or branches or Georgia state agency or agencies. The amount shall include the liabilities of an international banking facility maintained by such Georgia state branch or branches or Georgia state agency or agencies of such foreign bank.

(b) A foreign bank opening its initial Georgia state branch or Georgia state agency shall maintain, for its first year of operations, pledged assets based upon the Georgia state branch's or Georgia state agency's projection of total liabilities at the end of its first year of operation.

(c) Except as otherwise provided in these rules, calculation of liabilities of Georgia state branches and Georgia state agencies shall be in accordance with the instructions in the FFIEC 002 Report of Assets and Liabilities of U.S. Branches and Agencies of Foreign Banks (call report). The calculation of pledged assets shall be on the same basis on which quarterly averages are calculated for call report purposes (for example, based on current requirements, the average of liabilities subject to the pledged asset requirements as of the close of business on the weekdays during the previous month as specified by the FFIEC 002 instructions). The value of the amount of the pledged assets, calculated in accordance with the requirements of these rules, must equal the required value under these rules by the close of business on the fifth business day immediately following the end of the monthly period for which the calculation is made.

(4) Additional Pledged Asset conditions and limitations. The amount of pledged assets under O.C.G.A. § 7-1-1123 shall be subject to: (i) the conditions and limitations as the Department may consider to be necessary or desirable for the maintenance of a sound financial condition; (ii) the protection of depositors, creditors, and the public interest in this state; and (iii) the support of public confidence in the business of the Georgia state branch or Georgia state agency. Without limiting the authority of the Department under the prior sentence, the following conditions and limitations shall apply to the pledged assets unless the Department specifically permits otherwise:

(a) All pledged assets must be payable in the United States in United States' dollars.

(b) Each pledged asset shall be held in such form or subject to such conditions as the Department may prescribe. The Department may expressly disallow one or more otherwise eligible pledged asset, either for all institutions or for specific institutions. All pledged assets shall be subject to any additional conditions or limitations as determined by the Department with respect to such assets The balance of any other pledged asset or pledged asset category disallowed at the preceding examination or by direction of the Department for any other reason shall be ineligible for use as a pledged asset until the underlying reasons for the disallowance have been removed, and the Department has confirmed in writing that the pledged asset is no longer disallowed.

(c) All amounts due from the home office, other offices and affiliates of the foreign bank, including income accrued but uncollected on such amounts, shall be ineligible for use as a pledged asset, except that upon a letter application to the Department and the Department's prior written approval, all amounts due from other offices located within the United States shall be considered eligible for use as a pledged asset.

(5) Security agreement; segregation; minimum value; liens. All pledged assets shall be maintained pursuant to a written tri-party security agreement prescribed by the Department and entered into among the Georgia state branch or Georgia state agency, the Department, and the approved depository. Each security agreement shall create and effect the perfection of a first-lien security interest in the pledged assets in favor of the Department in accordance with the Uniform Commercial Code as adopted and in effect in this state. Without limiting this subsection (5), a foreign bank shall require the approved depository to segregate on its books and records the pledged assets held by the approved depository as custodian, and for such custody account to reflect the security interest in the custodied pledged assets for the benefit of the Department. Without further limiting this subsection (5), pledged assets that consist of deposit obligations of the approved depository shall be in deposit accounts titled to reflect the security interest of the Department, which deposit accounts shall be subject to and governed by a written security agreement meeting the requirements of this subsection (5). The pledged assets that consist of deposit accounts at the approved depository or, in the case of other assets that are placed in safekeeping with an approved depository acting as custodian:

(a) Shall not be reduced in value below the minimum required for that Georgia state branch or Georgia state agency without the prior approval of the Department, but in no event below the minimum amount required under O.C.G.A. § 7-1-410; and

(b) Shall be free from any lien, charge, right of setoff, credit, or preference in connection with any claim of the approved depository against the foreign bank, other than with respect to reasonable and customary fees payable to the approved depository.

(6) Reports and statements. Each Georgia state branch or Georgia state agency shall file with the Department such reports, account statements and other documents as required by the Department to determine compliance with this Rule.

(7) Multiple Georgia offices. If a foreign bank has more than one Georgia state branch or Georgia state agency, it shall determine the amount of the pledged assets and the amount of liabilities on an aggregate basis for all the foreign bank's Georgia state branches and Georgia state agencies.

(8) Liabilities requiring cover; excluded liabilities.

Liabilities requiring cover under these rules shall include all liabilities of a foreign bank appearing in the books, accounts and records of its Georgia state branches and Georgia state agencies as liabilities of such agency, agencies, branch or branches, including acceptances and such other liabilities (including contingent liabilities) as the Department shall determine, but excluding the following:

(a) amounts due and other liabilities to other offices, agencies, branches and affiliates of such foreign bank, including unremitted profits;

(b) reserves for possible loan losses and other contingencies;

(c) liabilities of an international banking facility to third parties and of a Georgia state branch or Georgia state agency to an international banking facility; and

(d) liabilities from repurchase agreements as determined by the Department on a case-by-case basis.

(9) Increase in Pledged Assets. For prudential or supervisory reasons, the Department may require, in individual cases or otherwise, that a foreign bank increase the amount of the pledged assets above the minimum amount.

(10) Valuation of Pledged Assets. The non-deposit obligations referred to in this Rule and custodied with an approved depository must be valued at the then amortized cost amount or the then current fair value, whichever is lower. FDIC-insured deposit obligations must be valued at the principal amount plus accrued but unpaid interest.

Notes

Ga. Comp. R. & Regs. R. 80-7-1-.11

O.C.G.A. §§ 7-1-61; 7-1-1109.

Original Rule entitled "Pledged Assets." adopted. F. Dec. 20, 2024; eff. Jan. 9, 2025.