Protecting public deposits in New York State.

To aid local officials, the New York State Government Finance Officers Association prepared a checklist to help them determine whether security and custody agreements contain the provisions necessary to constitute sound and legally enforceable documents. Although the checklist was developed specifically to comply with the requirements of New York state law, the guidelines may provide important advice for local officials in other states who are attempting to develop sound security/custodial agreements with their banks. The checklist is reprinted from the New York State GFOA Newsletter, September 1993. Security/Custody Agreement Checklist

* Identify parties to agreement

1. Local government

2. Bank

3. Custodian (if third party)

   * Define types of collateral which may be pledged by bank to secure deposits

1. Securities

2. Letters of credit

3. Surety bonds

   * Set forth methodology for determining value of collateral provided by bank

1. Statutory haircuts

2. Frequency of valuation

   * Prescribe total value of collateral required to be provided by bank

1. Collateral requirement should equal amount of uninsured deposits plus any margin requirements.

2. Requirement that bank provide additional collateral if value falls below collateral requirement.

3. Set forth manner in which collateral requirement may be changed during term of agreement.

   * Grant of security interest from bank to local government in pledged securities

1. Pledged securities must be transferred to local government or custodian in form suitable for transfer or with an assignment in blank.

2. Specify conditions under which pledged securities or other collateral may be substituted, released, reduced or presented for payment.

   * Define events of default and rights of local government upon default

   * Representations and warranties

1. Bank is located and authorized to do business in New York.

2. Form of security agreement has been approved by the bank's board of directors or loan committee which approval has been reflected in their minutes. C. Security agreement has been executed by authorized official of bank and will at all times be maintained as official record of bank.

4. Pledged securities are owned by bank free and clear of liens and claims.

5. Pledged securities, surety bonds and letters of credit comply with statutory requirements.

   * Custodial provisions

1. Specify manner in which custodian may hold pledged securities (e.g., vault, federal book entry system or clearing agency registered with Securities...