NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A1605
SPONSOR: Taylor TITLE OF BILL:
An act to amend the general municipal law and the banking law, in
relation to the establishment of a savings bank, savings and loan asso-
ciation or credit union municipal deposit program, and limiting deposits
of public funds in such institutions to two hundred fifty thousand
dollars
PURPOSE:
To allow savings banks, savings and loan associations and federal
savings banks to accept deposits from municipalities.
SUMMARY:
Section 1 amends paragraph c of subdivision 1 of section 10 of the
general municipal law to define public deposits.
Section 2 paragraphs f, g and h of subdivision 1 of section 10 of the
general municipal law are relettered paragraphs g, h and i and three new
paragraphs f, j and k defining credit union, savings bank, and savings
and loan association.
Section 3 amends subdivisions 2 and 4 of section 10, paragraph a of
subdivision 2, paragraph c of subdivision 2, and paragraph e of subdivi-
sion 4 of the general municipal law.
Section 4 amends subdivision 2 of section 11 of the general municipal
law.
Section 5 adds a new section 454-a to the banking law.
Section 6 sets forth the effective date of 90 days.
JUSTIFICATION:
The current law restricting municipal deposits to commercial banks is an
anachronism, stemming from the days when commercial banks were the most
secure option for these types of investments. At that time, savings
banks, savings & loan associations and credit unions, were smaller, less
secure entities that primarily served individual investors by providing
investment opportunities and offering loans, particularly mortgages to
residents of the communities they served. However, savings banks,
savings & loan associations and credit unions are now on par with
commercial banks in many of the services they provide as well as the
security they offer to their investors. Allowing savings banks, savings
& loans and credit unions to accept municipal deposits would be benefi-
cial to the communities they are serving by offering a competitive
alternative to commercial banks, who with no real affiliation or commit-
ment are often a large corporate entity to the community they serve.
PRIOR LEGISLATIVE HISTORY:
03/14/24 referred to banks
FISCAL IMPLICATIONS:
None to the State.
EFFECTIVE DATE:
This act shall take effect on the ninetieth day after it shall have
become a law.
STATE OF NEW YORK
________________________________________________________________________
1605
2025-2026 Regular Sessions
IN ASSEMBLY
January 10, 2025
___________
Introduced by M. of A. TAYLOR -- read once and referred to the Committee
on Banks
AN ACT to amend the general municipal law and the banking law, in
relation to the establishment of a savings bank, savings and loan
association or credit union municipal deposit program, and limiting
deposits of public funds in such institutions to two hundred fifty
thousand dollars
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Paragraph c of subdivision 1 of section 10 of the general
2 municipal law, as amended by chapter 623 of the laws of 1998, is amended
3 to read as follows:
4 c. "Public deposits" shall mean deposits of public funds in a bank,
5 savings bank, savings and loan association, credit union, or trust
6 company which are available for all uses generally permitted by the
7 bank, savings bank, savings and loan association, credit union, or trust
8 company to the depositing local government for actually and finally
9 collected funds under the bank's, savings bank's, savings and loan asso-
10 ciation's, credit union's, or trust company's account agreement or poli-
11 cies.
12 § 2. Paragraphs f, g and h of subdivision 1 of section 10 of the
13 general municipal law are relettered paragraphs g, h and i and three new
14 paragraphs f, j and k are added to read as follows:
15 f. "Credit union" shall mean a state-chartered credit union as defined
16 by subdivision nine of section two of the banking law or a federally-
17 chartered credit union as defined by the federal credit union act,
18 located and authorized to do business in New York.
19 j. "Savings bank" shall mean a savings bank as defined by subdivision
20 four of section two of the banking law or any federal savings bank.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD03400-01-5
A. 1605 2
1 k. "Savings and loan association" shall mean a savings and loan asso-
2 ciation as defined by subdivision eight of section two of the banking
3 law or any federal savings and loan association.
4 § 3. Subdivisions 2 and 4 of section 10 of the general municipal law,
5 as amended by chapter 623 of the laws of 1998, paragraph a of subdivi-
6 sion 2 as amended by chapter 128 of the laws of 2012 and paragraph c of
7 subdivision 2 and paragraph (e) of subdivision 4 as further amended by
8 section 104 of part A of chapter 62 of the laws of 2011, are amended to
9 read as follows:
10 2. a. (i) The governing board of every local government shall desig-
11 nate one or more banks, savings banks, savings and loan associations,
12 credit unions or trust companies for the deposit of public funds, the
13 disposition of which is not otherwise provided for by law, received by
14 the chief fiscal officer or any other officer authorized by law to make
15 deposits. Such designation shall be by resolution of the governing board
16 or, in the case of a city, such other body as may be authorized or
17 required by law to designate depositaries. Such resolution shall specify
18 the maximum amount which may be kept on deposit at any time in each such
19 bank, savings bank, savings and loan association, credit union or trust
20 company. Such designations and amounts may be changed at any time by
21 further resolution.
22 (ii) The governing board of a local government that has designated one
23 or more banks or trust companies for the deposit of public funds pursu-
24 ant to subparagraph (i) of this paragraph may, in its discretion,
25 authorize the designated bank or trust company to arrange for the rede-
26 posit of the local government's funds in one or more banking insti-
27 tutions, as defined in section nine-r of the banking law, for the
28 account of the local government, through a deposit placement program
29 that meets all of the following conditions:
30 (A) On or after the date that the local government's funds are
31 received, the designated bank or trust company (I) arranges for the
32 redeposit of such funds into deposit accounts in one or more banking
33 institutions and (II) serves as custodian for the local government with
34 respect to the funds redeposited into such accounts.
35 (B) Local government funds deposited in a designated bank or trust
36 company in accordance with this subparagraph and held in the designated
37 bank or trust company in excess of the amount insured by the federal
38 deposit insurance corporation pending redeposit of the funds pursuant to
39 this subparagraph shall be secured in accordance with subdivision three
40 of this section.
41 (C) The full amount of local government funds redeposited by the
42 designated bank or trust company into deposit accounts in banking insti-
43 tutions pursuant to this subparagraph (plus accrued interest, if any)
44 shall be insured by the federal deposit insurance corporation.
45 (D) At the same time that the money of the local government is rede-
46 posited pursuant to this subparagraph, the selected depository receives
47 an amount of deposits from customers of other financial institutions
48 pursuant to the deposit placement program that are at least equal to the
49 amount of the local government's funds redeposited by the designated
50 bank or trust company. The governing board of every local government
51 shall forward a copy of such resolution to the office of the state comp-
52 troller who shall retain such copy until such resolution is amended or
53 dissolved. A copy of such resolution shall be retained by the state
54 comptroller for record keeping purposes only.
55 b. Public funds deposited into a savings bank, federal savings bank,
56 credit union, federal credit union, savings and loan association or
A. 1605 3
1 federal savings and loan association shall be limited to two hundred
2 fifty thousand dollars.
3 c. Except as otherwise provided by law, all deposits shall be made to
4 the credit of the local government. The deposit of public funds pursuant
5 to this subdivision shall release the officer making the deposit and
6 [his or her] such officer's surety from any liability for loss of such
7 public funds by reason of the default or insolvency of any such bank,
8 savings bank, savings and loan association, credit union or trust compa-
9 ny.
10 [c.] d. The governing board of a local government, in which a banking
11 development district has been designated by the superintendent of finan-
12 cial services pursuant to section ninety-six-d of the banking law, may
13 designate a bank, trust company or national bank located in such
14 district for the deposit of public funds, the disposition of which is
15 not otherwise provided for by law, received by the chief fiscal officer
16 or other officer authorized by law to make such deposits. Such desig-
17 nation shall be by resolution of the governing board or, in the case of
18 a city, such other body as may be authorized or required by law to
19 designate depositories. Such resolution shall specify the maximum amount
20 which may be kept on deposit at any time with such bank, trust company
21 or national bank located in such district. Subject to an agreement
22 between such governing board and such banking institution, public funds
23 deposited in such banking institution may earn a fixed interest rate
24 which is at or below such banking institution's posted two year certif-
25 icate of deposit rate. In those instances where there is such an agree-
26 ment, its terms and conditions shall also be specified in the resol-
27 ution. Any such designation, amount, or agreement provisions may be
28 changed at any time by further resolution.
29 4. (a) Notwithstanding any other provision of law to the contrary, the
30 chief fiscal officer, or other officer authorized by law to make depos-
31 its, may, subject to the approval of the governing body of a local
32 government, by resolution, enter into a contract with a courier service
33 for the purpose of causing the deposit of public funds with a bank,
34 savings bank, savings and loan association, credit union or trust compa-
35 ny as provided in this section.
36 (b) The entrusting of public funds for deposit pursuant to paragraph
37 (a) of this subdivision shall release the officer entrusting the public
38 funds to the courier service and [his or her] such officer's surety from
39 any liability for loss of such public funds by the courier service in
40 the process of delivering such public funds to the designated bank,
41 savings bank, savings and loan association, credit union or trust compa-
42 ny.
43 (c) The local government authorizing the deposit of public funds by a
44 courier service pursuant to paragraph (a) of this subdivision shall
45 require the courier service to obtain a surety bond for the full amount
46 entrusted to the courier, payable to the local government and executed
47 by an insurance company authorized to do business in this state, the
48 claims paying ability of which is rated in the highest rating category
49 by at least two nationally recognized statistical rating organizations,
50 to insure against any loss of public funds entrusted to the courier
51 service for deposit or failure to deposit the full amount entrusted to
52 the courier.
53 (d) A deposit made by a courier on behalf of a local government shall
54 be deemed to be a deposit made by the chief fiscal officer or other
55 officer entrusting such funds for purposes of the requirements contained
56 in this section for securing public deposits.
A. 1605 4
1 (e) A bank, savings bank, savings and loan association, credit union
2 or trust company may, from time to time and as agreed upon with a local
3 government, reimburse all or part of, but not more than, the actual cost
4 incurred by the local government in transporting cash, negotiable
5 instruments or other items for deposit through a courier service. Any
6 such reimbursement agreement shall apply only to a specified deposit
7 transaction, and may be subject to such terms, conditions and limita-
8 tions as the bank, savings bank, savings and loan association, credit
9 union or trust company deems necessary to ensure sound banking prac-
10 tices, including, but not limited to, any terms, conditions or limita-
11 tions that may be required by the department of financial services or
12 other federal or state authority.
13 § 4. Subdivision 2 of section 11 of the general municipal law, as
14 amended by chapter 128 of the laws of 2012, is amended to read as
15 follows:
16 2. a. The governing board of any local government or, if the governing
17 board so delegates, the chief fiscal officer or other officer having
18 custody of the moneys may temporarily invest moneys not required for
19 immediate expenditure, except moneys the investment of which is other-
20 wise provided for by law, either: (1) in special time interest-bearing
21 deposit accounts in, or certificates of deposit issued by, a bank,
22 savings bank, savings and loan association, or share certificates issued
23 by a credit union or trust company located and authorized to do business
24 in this state; or (2) in accordance with all of the following condi-
25 tions:
26 (i) the moneys are invested through a bank or trust company located
27 and authorized to do business in this state;
28 (ii) the bank or trust company arranges for the deposit of the moneys
29 in certificates of deposit or share certificates in one or more banking
30 institutions, as defined in section nine-r of the banking law, for the
31 account of the local government;
32 (iii) the full amount of principal and accrued interest of each such
33 certificate of deposit or share certificate must be insured by the
34 federal deposit insurance corporation;
35 (iv) the bank or trust company acts as custodian for the local govern-
36 ment with respect to such certificates of deposit issued for the local
37 government's account; and
38 (v) at the same time that the local government's moneys are deposited
39 and the certificates of deposit or share certificates are issued for the
40 account of the local government, the bank or trust company receives an
41 amount of deposits from customers of other financial institutions equal
42 to or greater than the amount of the moneys invested by the local
43 government through the bank or trust company.
44 b. For any investment made pursuant to paragraph a of this subdivi-
45 sion, such time deposit account or certificate of deposit or share
46 certificates shall be payable within such time as the proceeds shall be
47 needed to meet expenditures for which such moneys were obtained and
48 provided further that such time deposit account or certificate of depos-
49 it or share certificates be secured in the same manner as is provided
50 for securing deposits of public funds by subdivision three of section
51 ten of this article.
52 § 5. The banking law is amended by adding a new section 454-a to read
53 as follows:
54 § 454-a. Deposits of public money with credit unions; security. A
55 credit union may accept deposits of public money subject to the limita-
56 tions provided in section ten of the general municipal law. Such credit
A. 1605 5
1 union shall pledge assets or furnish other security satisfactory in form
2 and amount to the depositor, for the repayment of monies held in the
3 name of such depositor, when required to be secured by applicable law,
4 decree or regulation.
5 § 6. This act shall take effect on the ninetieth day after it shall
6 have become a law.
