BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 279|
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THIRD READING
Bill No: AB 279
Author: Dickinson (D)
Amended: 6/26/13 in Senate
Vote: 21
SENATE GOVERNANCE & FINANCE COMMITTEE : 7-0, 6/5/13
AYES: Wolk, Knight, Beall, DeSaulnier, Emmerson, Hernandez, Liu
SENATE BANKING & FINANCIAL INSTITUTIONS COMM. : 9-0, 6/19/13
AYES: Correa, Berryhill, Beall, Calderon, Hill, Hueso, Roth,
Torres, Walters
ASSEMBLY FLOOR : 77-0, 4/15/13 (Consent) - See last page for
vote
SUBJECT : Financial affairs
SOURCE : California Bankers Association
California Independent Bankers
DIGEST : This bill, until January 1, 2017, authorizes local
governments to invest up to 30% of their surplus funds through a
private sector deposit placement service, as specified.
ANALYSIS : Existing law allows local officials to deposit
money in state or national banks, savings associations, federal
associations, credit unions, or federally insured industrial
loan companies in the State of California. These public
deposits, which include funds placed into certificates of
deposit (CDs), are subject to restrictions, including a
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requirement that deposits must be insured by the Federal Deposit
Insurance Corporation (FDIC) or, to the extent not insured,
collateralized with certain types of securities in specified
amounts. FDIC insurance usually covers only $250,000 per
depositor per institution. As a result, to secure large public
deposits, depository institutions must hold significant amounts
of collateral.
Existing law authorizes local agencies to invest up to 30% of
their surplus funds in CDs at depository institutions that use a
private sector entity, which assists in the placement of CDs, as
long as the full amount of the principal and interest that may
be accrued during the maximum term of each CD is insured at all
times by either the FDIC or the National Credit Union
Administration.
This bill:
1. Expands the ways in which local governments may invest their
surplus funds, by authorizing local agencies to invest up to
30% of their surplus funds in deposits at depository
institutions that use a private sector entity to help place
local agency deposits. The selected depository institution
may use a private sector entity to help place local agency
deposits with one or more commercial banks, savings banks,
savings and loan associations, or credit unions that are
located in the United States, and are within the network used
by the private sector entity for this purpose. Any private
sector entity used by a selected depository institution to
help place its local agency deposits must maintain policies
and procedures, as specified.
2. Authorizes local governments to invest up to 30% of their
surplus funds in CDs at depository institutions that use a
private sector entity to help place those deposits. Expands
that authority beyond CDs to any type of deposit. The new
authority (i.e., non-CD deposit authority) will only be
effective until January 1, 2017, and is limited; no local
agency could invest more than 10% of its surplus funds in any
single non-CD placement service.
Comments
Statutory collateralization requirements limit small community
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banks' capacity to accept large public deposits. Many local
agencies' treasurers want to be able to make deposits with
community banks, but don't want the administrative and
monitoring burdens of maintaining multiple $250,000 deposits at
separate institutions to ensure FDIC insurance coverage.
Deposit placement services address both of these concerns. Laws
in 28 states have been amended to allow public funds to be
deposited with a placement service for deposits other than CDs.
This bill follows suit by expanding California statutes that
govern local agencies' use of deposit placement services to
include deposits other than CDs. This bill benefits public
agencies and local communities by giving California local
officials greater flexibility to place public deposits in
community banks without the difficulties of complying with
securitization requirements.
Prior/Related Legislation
SB 1344 (Kehoe, Chapter 112, Statutes of 2010) deleted the
sunset date contained in AB 2011, thus permanently extending the
ability of local agencies to use private sector, CD placement
services.
AB 2011 (Vargas, Chapter 459, Statutes of 2006) until January 1,
2012, authorized local agencies to invest surplus funds in a
private sector, CD placement service.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local:
No
SUPPORT : (Verified 6/26/13)
California Bankers Association (co-source)
California Independent Bankers (co-source)
AFSCME, AFL-CIO
California Credit Union League
Community Business Bank
Five Star Bank
Malaga Bank
Vibra Bank
ARGUMENTS IN SUPPORT : This bill is co-sponsored by CIB and
CBA. CIB states that California's current law authorizing local
agencies to deposit up to 30% of their surplus funds with
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depository institutions that use private sector CD placement
services has helped California's community banks attract $4.3
billion from local agencies. These monies have been reinvested
locally via loans to households and small businesses. However,
because current law only applies to CDs, community banks may be
limited in their ability to attract a substantial portion of
public funds that are placed in transaction and money market
deposit accounts. This bill gives these banks another
opportunity to secure these local agency deposits.
ASSEMBLY FLOOR : 77-0, 4/15/13
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, Bloom,
Blumenfield, Bocanegra, Bonilla, Bonta, Bradford, Brown,
Buchanan, Ian Calderon, Campos, Chau, Chávez, Chesbro, Conway,
Cooley, Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox,
Frazier, Beth Gaines, Garcia, Gatto, Gomez, Gordon, Gorell,
Gray, Grove, Hagman, Hall, Roger Hernández, Holden, Jones,
Jones-Sawyer, Levine, Linder, Logue, Maienschein, Mansoor,
Medina, Melendez, Mitchell, Morrell, Mullin, Muratsuchi,
Nazarian, Nestande, Olsen, Pan, Patterson, Perea, V. Manuel
Pérez, Quirk, Quirk-Silva, Rendon, Salas, Skinner, Stone,
Ting, Torres, Wagner, Waldron, Weber, Wieckowski, Wilk,
Williams, Yamada, John A. Pérez
NO VOTE RECORDED: Harkey, Lowenthal, Vacancy
AB:d 6/26/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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