Current through Register Vol. 28, No. 3, September 1, 2024
5.1
Investment Objectives. The
funds in the Collection and Disbursement Accounts must be immediately available
to support the State's daily governmental programs and activities. The primary
investment objectives are therefore safety and liquidity of such funds; return
is a secondary priority. OST may, consistent with these investment objectives,
minimize credit risk associated with demand deposit account balances at Cash
Management Banks through same-day money market mutual fund sweep products in
accordance with subsection 5.2.2 and/or banking services arrangements offering
"daylight overdraft" or similar privileges. End-of-day ledger balances shall
besecured as provided in subsection 5.2.
5.2
Permissible Investments.
Cash Management Banks shall maintain State Funds in either collateralized
demand deposit accounts or open-end money market mutual funds, in each case,
subject to the provisions of subsections 5.2.1 and 5.2.2, respectively, in
order to mitigate the risk of State Funds being exposed to the credit risk of
such financial institution.
5.2.1
Demand
Deposit Accounts. State Funds held by Cash Management Banks in demand
deposit accounts shall be collateralized with one or more of following approved
methods:
(a) pledges of government securities
that meet the definitions set out in subsections 6.3.1.1 and 6.3.2.1 to a
custody account held for the benefit of the State at a Federal Reserve Bank, or
held by an independent trust company, bank or similar financial institution
rated in the highest rating category by at least one Nationally Recognized
Statistical Rating Organizations approved by OST ("NRSRO");
(b) irrevocable standby letters of credit
("LOCs") issued by a Federal Home Loan Bank or financial institution rated in
the highest rating category by at least one NRSRO; and
(c) surety bonds issued by insurance
companies rated in the highest rating category by at least one NRSRO
(collectively, "Eligible Collateral"). The terms of any pledge or custody
agreement, LOC, or surety bond shall be reviewed and approved by OST. The
aggregate value of Eligible Collateral shall equal or exceed the total average
monthly closing ledger balances of State Funds held or expected to be held by
Cash Management Banks during the prior month, plus such additional amount of
Eligible Collateral as OST may require Cash Management Banks to provide to
protect against volatility and ensure that all uninsured ledger balances are
fully secured at the close of each business day. Eligible Collateral in the
form of government securities shall be marked to market at the close of each
business day using an independent pricing service. A Cash Management Bank may
substitute or reduce Eligible Collateral provided that Eligible Collateral
levels meet or exceed the foregoing requirements. OST shall be provided with
same-day notice of any such substitutions or reductions of Eligible Collateral.
In addition, a Cash Management Bank shall provide OST with a detailed report of
Eligible Collateral held in a custody account as requested by
OST.
5.2.2
Money
Market Mutual Funds. State Funds held by Cash Management Banks in money
market mutual funds shall be invested solely in government securities that meet
the definitions set out in subsections 6.3.1 and 6.3.2 and which are rated in
the highest rating category by at least one NRSRO.
5.3
Call Reports. Each Cash
Management Bank shall provide OST with a consolidated report of condition and
income, generally referred to as a "call report," with respect to such
financial institution on a quarterly basis unless such report is available
publicly from the Federal Financial Institutions Examination Council's web site
or a successor agency's website.
