NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A2881B
SPONSOR: Brindisi TITLE OF BILL: An act to amend the general municipal law, in relation
to the definition of eligible securities in relation to obligations of
domestic corporations
PURPOSE:
To allow state chartered banking institutions to use domestic bonds that
meet the definition of "investment grade" as collateral to secure New
York State municipal deposits.
SUMMARY OF PROVISIONS:
Section 1 Subparagraph (viii)of paragraph f of subdivision 1 of section
10 of the general municipal law, as amended by chapter 623 of the laws
of 1998, is amended to read as follows: (viii) Obligations of domestic
corporations rated in one of the
two four highest rating categories by
at least one nationally recognized statistical rating organization.
Section 2 is the effective date.
EXISTING LAW:
Current law state that one category of "eligible securities that a bank
can use as collateral to secure New York State municipal deposits is
"obligations of domestic corporations rated in one of the two highest
rating categories by at least one nationally recognized statistical
rating organization."
JUSTIFICATION:
On June 3, 2015, the Federal Reserve updated their "Collateral Guide-
lines" to allow banks to use, as collateral, domestic bonds that "meet
the definition of investment grade" at a minimum.
The Federal Reserve considers investment grade corporate bonds to be
acceptable collateral for Discount Window borrowings; New York State
does not allow them to be pledged as collateral to secure its municipal
deposits. This bill allows state chartered banking institutions to
accept and pledge investment grade corporate bonds as collateral for any
Discount Window borrowing, to the extent allowed by the Federal Reserve.
Also, New York State collateral requirements state that a bank cannot
pledge municipal bonds as collateral if they mature more than five years
out. This bill changes that prohibition by allowing municipal bonds
having five or more years of maturity to be pledged to secure such
deposits.
LEGISLATIVE HISTORY:
2015-16 - S.4305 Passed Senate/A.7096 - Banks Committee
FISCAL IMPLICATIONS:
To be determined.
EFFECTIVE DATE:
This act shall take effect on the first day of January next succeeding
the date on which it shall have become a law.
STATE OF NEW YORK
________________________________________________________________________
2881--B
2017-2018 Regular Sessions
IN ASSEMBLY
January 23, 2017
___________
Introduced by M. of A. BRINDISI -- read once and referred to the Commit-
tee on Banks -- committee discharged, bill amended, ordered reprinted
as amended and recommitted to said committee -- again reported from
said committee with amendments, ordered reprinted as amended and
recommitted to said committee
AN ACT to amend the general municipal law, in relation to the definition
of eligible securities in relation to obligations of domestic corpo-
rations
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Subparagraph (viii) of paragraph f of subdivision 1 of
2 section 10 of the general municipal law, as amended by chapter 623 of
3 the laws of 1998, is amended to read as follows:
4 (viii) Obligations of domestic corporations rated in one of the [two]
5 four highest rating categories by at least one nationally recognized
6 statistical rating organization.
7 § 2. This act shall take effect on the first of January next succeed-
8 ing the date on which it shall have become a law.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD01882-04-7
