CHAPTER 665a
DEPOSITS

PART I
DEPOSITS AND CHECKS

      Sec. 36a-299. (Formerly Sec. 36-9i). Permitted and prohibited transfers by negotiable withdrawal order. (a) A Connecticut bank may permit unlimited transfers by negotiable withdrawal order from a savings account consisting of savings deposits deposited to the credit of, or in which the entire beneficial interest is held by, one or more individuals, or by a corporation, partnership, association or other organization operated primarily for religious, philanthropic, charitable, educational, political, or other similar purposes and not operated for profit or from deposits of public funds by an officer, employee or agent of the United States or of any state, county, municipality or political subdivision thereof.

      (b) A Connecticut bank may permit transfers by negotiable withdrawal order from savings accounts in which any beneficial interest is held by a corporation, partnership, association or other organization operated for profit, provided under the terms of the deposit contract or by practice of the bank, the depositor may make no more transfers than the number of transfers permitted under 12 CFR 204.2(d)(2).

      (P.A. 73-195, S. 11, 14; P.A. 77-54, S. 2, 4; P.A. 81-472, S. 66, 159; P.A. 83-438, S. 3, 8; P.A. 94-122, S. 140, 340; P.A. 95-70, S. 7, 8; P.A. 11-216, S. 6.)

      History: P.A. 77-54 replaced previous provisions which had prohibited transfer by negotiable withdrawal order from savings deposit in name of government, governmental agency, trade, corporation or partnership name or in name containing commercial, occupational or professional designation and had further prohibited such withdrawals from accounts "not in such a name" for governmental, commercial, occupational or professional purposes; Sec. 36-104l transferred to Sec. 36-9i in 1979; P.A. 81-472 made technical changes; P.A. 83-438 allowed state banks and trust companies, savings banks and savings and loan associations to accept public funds in the form of negotiable withdrawal orders; P.A. 94-122 allowed banks to provide NOW accounts to political organizations, effective January 1, 1995; Sec. 36-9i transferred to Sec. 36a-299 in 1995; P.A. 95-70 amended Subsec. (a) to specifically authorize "unlimited" transfer and to delete "only" re withdrawals from savings account and reference to corporations operated for "fraternal" purposes, effective May 31, 1995; P.A. 11-216 amended Subsec. (b) to add provision re practice of the bank and replace former limitation of no more than three transfers by negotiable withdrawal order or check made by depositor, and exceptions to such limitation, with limitation of no more transfers than number permitted under 12 CFR 204.2(d)(2), effective July 13, 2011.

PART III
PROTECTION OF PUBLIC DEPOSITS

      Sec. 36a-330. (Formerly Sec. 36-382). Definitions. As used in sections 36a-330 to 36a-338, inclusive, unless the context otherwise requires:

      (1) "Business day" means any day other than a Saturday, Sunday or day on which a financial institution is closed as required or authorized by state or federal law;

      (2) "Close of business" means the time at which a financial institution closes for regular business operations on any business day;

      (3) "Eligible collateral" means (A) United States treasury bills, notes and bonds, (B) United States government agency securities, (C) United States agency variable-rate securities, (D) mortgage pass-through or participation certificates or similar securities, (E) performing one-to-four-family residential mortgage loans that meet the following criteria: (i) The mortgage loan has a loan-to-value ratio which is less than or equal to eighty per cent for loans without private mortgage insurance, or a loan-to-value ratio which is less than or equal to ninety-five per cent for loans with private mortgage insurance; and (ii) the mortgage loan has a payment history of not more than one payment over thirty days in arrears during the past twelve consecutive months or, if the loan has a payment history of less than twelve months in duration, the loan meets the documentation requirements of the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation; provided, in the case of a subsequent default under any such mortgage loan that continues uncured for more than sixty days, such loan shall no longer qualify as eligible collateral and shall be replaced by a performing mortgage loan that meets the criteria set forth in this subdivision, and (F) state and municipal bonds;

      (4) "Financial institution" means a bank, Connecticut credit union, federal credit union or an out-of-state bank that maintains in this state a branch as defined in section 36a-410;

      (5) "Loss" means issuance of an order of supervisory authority restraining a qualified public depository from making payments of deposit liabilities or the appointment of a receiver for a qualified public depository;

      (6) "Public deposit" means (A) moneys of this state or of any governmental subdivision of this state or any commission, committee, board or officer thereof, any housing authority or any court of this state and (B) moneys held by the Judicial Department in a fiduciary capacity;

      (7) "Qualified public depository" or "depository" means a bank, Connecticut credit union, federal credit union or an out-of-state bank that maintains in this state a branch, as defined in section 36a-410, which receives or holds public deposits and (A) segregates eligible collateral for public deposits as described in section 36a-333, or (B) arranges for a letter of credit to be issued in accordance with section 36a-337.

      (1967, P.A. 517, S. 1; P.A. 77-614, S. 156, 587, 610; P.A. 78-303, S. 85, 136; P.A. 80-482, S. 259, 345, 348; P.A. 81-193, S. 11, 16; P.A. 83-331, S. 3; P.A. 84-510, S. 1, 5; P.A. 87-9, S. 2, 3; P.A. 91-245, S. 1; P.A. 92-12, S. 78; P.A. 94-122, S. 155, 340; P.A. 95-155, S. 22, 29; P.A. 08-39, S. 1; P.A. 11-50, S. 8.)

      History: P.A. 77-614 and P.A. 78-303 replaced definition of "commission", i.e. Connecticut Public Deposit Protection Commission, and reference thereto, with definition of "commissioner", i.e. banking commissioner within the department of business regulation, and like references, effective January 1, 1979; P.A. 80-482 deleted reference to abolished department of business regulation and restored commissioner as head of independent banking department; P.A. 81-193 amended Subsec. (b) by adding to the definition of "qualified public depository" the words "savings bank, federal savings bank, savings and loan association or federal savings and loan association"; P.A. 83-331 amended Subsec. (b) redefining "qualified public depository" to include state or federal credit unions; P.A. 84-510 amended Subsec. (a) to include moneys of housing authorities in the definition of "public deposit"; (Revisor's note: Pursuant to P.A. 87-9 "banking commissioner" was changed editorially by the Revisors to "commissioner of banking"); P.A. 91-245 redefined "public deposit" to include moneys held by the judicial department in a fiduciary capacity, amended Subsec. (b) by adding "or depository", redefined the term "eligible collateral" in Subsec. (e) and deleted Subsec. (f) defining "maximum liability"; P.A. 92-12 redesignated Subsecs. and Subdivs; P.A. 94-122 deleted the definition of "commissioner", alphabetized the definitions and made technical changes, effective January 1, 1995; Sec. 36-382 transferred to Sec. 36a-330 in 1995; P.A. 95-155 added references to out-of-state banks in Subdiv. (2) and (5) and deleted references to public depositories in Subdiv. (4), effective June 27, 1995; P.A. 08-39 amended Subdiv. (5) to add provision re letter of credit issued in accordance with Sec. 36a-337 (Revisor's note: In 2009, Subpara. designators "(i)" and "(ii)" in Subdiv. (5) were changed editorially by the Revisors to "(A)" and "(B)", respectively, for consistency with customary statutory usage); P.A. 11-50 added new Subdivs. (1) and (2) defining "business day" and "close of business" and redesignated existing Subdivs. (1) to (5) as Subdivs. (3) to (7), effective June 13, 2011.

      Sec. 36a-333. (Formerly Sec. 36-386). Collateral requirements. (a) To secure public deposits, each qualified public depository shall at all times maintain, segregated from its other assets as provided in subsection (b) of this section, eligible collateral in an amount at least equal to the following percentage of public deposits held by the depository: (1) For any qualified public depository having a risk-based capital ratio of ten per cent or greater, a sum equal to ten per cent of all public deposits held by the depository; (2) for any qualified public depository having a risk-based capital ratio of less than ten per cent but greater than or equal to eight per cent, a sum equal to twenty-five per cent of all public deposits held by the depository; (3) for any qualified public depository having a risk-based capital ratio of less than eight per cent but greater than or equal to three per cent, a sum equal to one hundred per cent of all public deposits held by the depository; (4) for any qualified public depository having a risk-based capital ratio of less than three per cent, and, notwithstanding the provisions of subdivisions (1) to (3), inclusive, of this subsection, for any qualified public depository which has been conducting business in this state for a period of less than two years except for a qualified public depository that is a successor institution to a qualified public depository which conducted business in this state for two years or more, a sum equal to one hundred twenty per cent of all public deposits held by the depository; provided, the qualified public depository and the public depositor may agree on an amount of eligible collateral to be maintained by the depository that is greater than the minimum amounts required under subdivisions (1) to (4), inclusive, of this subsection; (5) notwithstanding the risk-based capital ratio provisions of subdivisions (1) to (3), inclusive, of this subsection, for any qualified public depository that is an uninsured bank, a sum equal to one hundred twenty per cent of all public deposits held by the depository; and (6) notwithstanding the risk-based capital ratio provisions of subdivisions (1) to (3), inclusive, of this subsection, for any qualified public depository that is subject to an order to cease and desist, consent order or a preliminary warning letter, or has entered into a stipulation and agreement, memorandum of understanding or a letter of understanding and agreement with a bank or credit union supervisor, a sum equal to one hundred twenty per cent of all public deposits held by the depository, provided, the qualified public depository and the public depositor may agree on an amount of eligible collateral to be maintained by the depository that is greater than the minimum amounts required under subdivisions (1) to (6), inclusive, of this subsection. For purposes of this subsection, the amount of all public deposits held by the depository shall be determined at the close of business on the day of receipt of any public deposit and any deficiency in the amount of eligible collateral required under this section shall be cured not later than the close of business on the following business day. For purposes of this subsection, the depository's risk-based capital ratio shall be determined, in accordance with applicable federal regulations and regulations adopted by the commissioner in accordance with chapter 54, based on the most recent quarterly call report, provided (A) if, during any calendar quarter after the issuance of such report, the depository experiences a decline in its risk-based capital ratio to a level that would require the depository to maintain a higher amount of eligible collateral under subdivisions (1) to (4), inclusive, of this subsection, the depository shall increase the amount of eligible collateral maintained by it to the minimum required under subdivisions (1) to (4), inclusive, of this subsection based on such lower risk-based capital ratio and shall notify the commissioner of its actions; and (B) if, during any calendar quarter after the issuance of such report, the commissioner reasonably determines that the depository's risk-based capital ratio is likely to decline to a level that would require the depository to maintain a higher amount of eligible collateral under subdivisions (1) to (4), inclusive, of this subsection, the commissioner may require that the depository increase the amount of eligible collateral maintained by it to the minimum required under subdivisions (1) to (4), inclusive, of this subsection based on the commissioner's determination of such lower risk-based capital ratio.

      (b) Each qualified public depository having a risk-based capital ratio of eight per cent or greater shall transfer eligible collateral maintained under subsection (a) of this section to its own trust department, provided such trust department is located in this state unless the commissioner approves otherwise, to the trust department of another financial institution, provided such eligible collateral shall be maintained in such other financial institution's trust department located in this state unless the commissioner approves otherwise, or to a federal reserve bank or federal home loan bank. Each qualified public depository having a risk-based capital ratio of less than eight per cent shall transfer eligible collateral maintained under subsection (a) of this section to the trust department of a financial institution that is not owned or controlled by the depository or by a holding company owning or controlling the depository, provided such eligible collateral shall be maintained in such other financial institution's trust department located in this state unless the commissioner approves otherwise, or to a federal reserve bank or federal home loan bank. Such transfers of eligible collateral shall be made in a manner prescribed by the commissioner. Eligible collateral shall be valued at market value or as determined by the commissioner if market value is not readily determinable, and the value of such eligible collateral shall be determined and adjusted on a quarterly basis. Without the requirement of any further action, the commissioner shall have, for the benefit of public depositors, a perfected security interest in all such eligible collateral held in such segregated trust accounts, granted pursuant to and in accordance with the terms of the agreement between the public depositor and the qualified public depository. Such security interest shall have priority over all other perfected security interests and liens.

      (c) The depository shall have the right to make substitutions of eligible collateral at any time without notice. The depository shall have the right to reduce the amount of eligible collateral maintained under subsection (a) of this section provided such reduction shall be determined based on the amount of all public deposits held by the depository and the depository's risk-based capital ratio as determined in accordance with said subsection (a). The depository shall provide written notice to its public depositors of any such reduction in the amount of eligible collateral maintained under subsection (a) of this section.

      (d) The income from the assets which constitute segregated eligible collateral shall belong to the depository without restriction.

      (e) Eligible collateral pledged to secure public deposits under subsection (a) of this section shall have a minimum market value as expressed in the following collateral ratios:

      Sec. 36a-334. (Formerly Sec. 36-387). Procedure upon loss. When the commissioner determines that a loss has occurred, the commissioner shall as soon as possible make payment to the proper public officers of all public deposits subject to such loss, pursuant to the following procedure: (1) For the purposes of determining the sums to be paid, the commissioner or receiver shall, within twenty days after issuance of a restraining order or taking possession of any qualified public depository, ascertain the amount of public deposits held by the depository as disclosed by its records and the amount thereof covered by deposit insurance and certify the amounts to each public depositor having public funds on deposit in the depository; (2) within ten days after receipt of such certification, each such public depositor shall furnish to the commissioner verified statements of its deposits in the depository as disclosed by its records plus information concerning any letters of credit issued to the public depositor or any private insurance policy used to secure public deposits, pursuant to section 36a-337; (3) upon receipt of such certificate and statements, the commissioner shall ascertain and fix the amount of such public deposits, net after deduction of any deposit insurance and any amount received or to be received by the public depositor pursuant to a letter of credit or private insurance policy issued in accordance with section 36a-337, and assess the same against the depository in which the loss occurred; (4) the assessment made by the commissioner shall be payable on the second business day following demand, and in case of the failure of the qualified public depository so to pay, the commissioner shall immediately take possession of the eligible collateral, if any, segregated by the depository pursuant to sections 36a-330 to 36a-338, inclusive, and liquidate the same for the purpose of paying such assessment; (5) upon receipt of the assessment, the commissioner shall reimburse the public depositors of the depository in which the loss occurred to the extent of the depository's net deposit liability to them.

      (1967, P.A. 517, S. 6; P.A. 77-614, S. 158, 610; P.A. 87-9, S. 2, 3; P.A. 91-245, S. 5; P.A. 92-12, S. 79; P.A. 94-122, S. 159, 340; P.A. 08-39, S. 2; P.A. 11-50, S. 10.)

      History: P.A. 77-614 replaced bank commissioner with banking commissioner and references to Public Deposit Protection Commission with references to said commissioner, effective January 1, 1979; (Revisor's note: Pursuant to P.A. 87-9 "banking commissioner" was changed editorially by the Revisors to "commissioner of banking"); P.A. 91-245 deleted provisions re assessment of loss against all other qualified public depositories in proportion to their maximum liability and made technical changes; P.A. 92-12 redesignated Subdivs; P.A. 94-122 made technical changes, effective January 1, 1995; Sec. 36-387 transferred to Sec. 36a-334 in 1995; P.A. 08-39 amended Subdiv. (2) to add requirement re information concerning letters of credit and Subdiv. (3) to add requirement re amount received or to be received pursuant to letter of credit and made a technical change in Subdiv. (4); P.A. 11-50 added provisions re private insurance policy used to secure public deposits in Subdivs. (2) and (3), effective June 13, 2011.