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Upcoming Changes in Collateralization: KeyBank Public Sector Insights for 2008

Join Mark M. Farrell of KeyBank Public Sector Group at the OMFOA/OACTFO Conference this Spring 2008 to learn about important revisions to collateralization laws affecting public funds. Discover how recent updates to HB 2901 and ORS 295 will streamline processes for public depositors, including new requirements for banker qualifications and collateral management. Gain insights into reducing liability for public officials and how pooled collateral systems enhance security for depositors. Don't miss this opportunity to stay informed!

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Upcoming Changes in Collateralization: KeyBank Public Sector Insights for 2008

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  1. 2008 Banking Update Upcoming Changes in Collateralization Mark M. Farrell, KeyBank Public Sector Group OMFOA/OACTFO Conference Spring 2008 Phone (503) 790-7543

  2. Current Responsibilities and Procedures • HB 2901’s Revisions to ORS 295 • (landru.leg.state.or.us/07reg/measpdf/hb2900.dir/hb2901.en.pdf) • New Structure Effective July 1, 2008 2

  3. Current System State Treasury Bank Depositors COP COP COP Pool Manager Collateral = 25%/110% of Total COP’s 3

  4. Revisions to ORS 295 • Current System • Depositor must request COP • Depositor verifies that bank is a qualified depository (www.ost.state.or.us/divisions/finance/qualifieddepositoriespublicfunds.htm) • No notice by depositor to State Treasury of its depository banks • Collateral traditionally based on estimated peak balances • New System • No COP’s – reduced paperwork and administration • Depositor verifies that bank is a qualified depository • Depositor required to notify State Treasury of its depository banks and of local contact • Collateral based on actual balances 4

  5. Revisions to ORS 295 (cont.) • Current System • Depositor responsible for maintaining adequate collateral - potential personal liability for public officials • Banks pledge 25% collateral (110% if required by State Treasury) • A bank’s collateral secures its depositors only • A bank is not responsible for another bank’s performance • New System • Banks report public deposits quarterly to State Treasury –eliminates some personal liability for public officials • Banks pledge 10% collateral if well capitalized, 25% if adequately capitalized, 110% if undercapitalized • All banks’ collateral is pooled and secures all depositors of a bank incurring a loss • To the extent the collateral pool is inadequate to cover a loss, all banks are responsible pro rata for the shortfall 5

  6. New System State Treasury Bank A Bank B Bank C Pool Manager Collateral = 10%/25%/ 110% of Deposits Pool Manager Collateral = 10%/25%/ 110% of Deposits Pool Manager Collateral = 10%/25%/ 110% of Deposits Collateral Pool 6

  7. Mark M. Farrell Senior Relationship Manager Public Sector Group 1211 SW Fifth Avenue, Suite 400 Mailcode: OR-20-21-0444 Portland, OR 97204 Tel: 503.790.7543 Fax: 503.790.7574 mark_m_farrell@keybank.com Mark S. Hudspeth Senior Vice President Public Sector Group 1211 SW Fifth Avenue, Suite 400 Mailcode: OR-20-21-0444 Portland, OR 97204 Tel: 503.790.7682 Fax: 503.790.7574 mark_s_hudspeth@keybank.com • Handouts • Questions? • Contacts: 7

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