34 Tex. Admin. Code § 4.108 - Acceptable Collateral

(a) To properly secure the deposit of public funds and to preserve the integrity and viability of the pooled collateral program, the comptroller will designate those instruments in this section and on its website that it deems acceptable to pledge as collateral. The comptroller's decision regarding whether an instrument is deemed acceptable collateral, either on its own determination or upon petition by a participating depository institution, is final and not subject to review.

(b) The comptroller will designate acceptable collateral for the program from those instruments allowed as eligible collateral under Government Code, §2257.02(4). The comptroller will designate acceptable collateral based upon its associated risks, its preservation of market value, its operational efficiencies, and such other appropriate criteria that may be developed by the comptroller.

(c) The comptroller will review its designation of acceptable collateral each state fiscal year and more often if needed. At its discretion the comptroller may add or remove its designation of acceptable collateral from time to time as appropriate to protect the deposit of public funds and the integrity of the pooled collateral program. The comptroller will provide at least 180 days notice of the same to participating depository institutions to allow substitution of a pledged instrument that is no longer deemed acceptable collateral, unless a shorter notice is required to adequately secure the deposit of public funds.

(d) A participating depository institution may make a written request that the comptroller approve an instrument that is not currently deemed as acceptable collateral. The participating depository institution will provide appropriate documentation to substantiate its request. The comptroller will review the request and notify the participating depository institution of its decision of whether to add the instrument to the designation of acceptable collateral that may be pledged by a participating depository institution and the rationale for its decision. The comptroller may accept or reject a proposed instrument based on the criteria for designating acceptable collateral.

(e) Except as provided in subsection (c) or (f) of this section, the following instruments are deemed acceptable to be pledged as collateral in the pooled collateral program:

(1) United States Treasury obligations;

(2) Mortgage-backed securities (Federal National Mortgage Association discount notes, primary debt instruments or debentures) with a remaining maturity of 15 years or less;

(3) Federal Home Loan Bank system consolidated bonds and discount notes issued in book-entry form;

(4) Federal Home Loan Bank Beneficiary Standby Letters of Credit that are fully collateralized;

(5) Federal Farm Credit Banks consolidated system-wide bonds and discount notes issued in book-entry form;

(6) Government National Mortgage Association securities;

(7) Federal Home Loan Mortgage Corporation discount notes and primary debt instruments or debentures, and only those mortgage-backed securities with a remaining maturity of 15 years or less;

(8) State of Texas bonds issued by various state agencies and four year educational institutions of the State of Texas; and

(9) Municipal bonds issued by governmental entities of the State of Texas with a rated investment quality by a nationally recognized investment rating firm of not less than "A" or its equivalent. By way of illustration, and not limitation, governmental entities include independent school districts, junior colleges, incorporated cities, certain road districts, certain municipal water and/or utility districts, hospital districts (excluding health facility bonds), and water and air pollution control districts.

(f) The following instruments are not deemed acceptable to be pledged as collateral in the pooled collateral program:

(1) Adjustable Rate Mortgages (ARM);

(2) Collateralized Mortgage Obligations (CMO);

(3) step-up securities;

(4) variable rate securities; and

(5) securities not found on common pricing systems.

Notes

34 Tex. Admin. Code § 4.108

The provisions of this §4.108 adopted to be effective October 19, 2010, 35 TexReg 9345