The West Virginia State Treasurer’s Office is responsible for ensuring public funds deposited in financial institutions are properly collateralized and protected. The West Virginia Security for Public Deposits Act (the “Act”), W. Va. Code §12-1B-1 et. seq., authorizes public deposits made by the state or any political subdivision of the state be held at an approved designated state depository and collateralized per West Virginia State Code §12-1B-5 and §12-1B-7. All public funds must be collateralized, and collateral will be held in benefit to the West Virginia State Treasurer. There are no exemptions or exceptions to this Act. West Virginia State Code supersedes all local laws and ordinances.
House Bill 4801 allows the State Treasurer to announce commencement of the West Virginia Security for Public Deposits Act by publishing a notice in the State Register at least 30 days prior to commencement of the program. An announcement will also be made on the State Treasurer’s Office website.
The Act requires approved designated state depositories to choose between two methods of collateralizing public funds: the Dedicated Single Bank Method and the Multibank Pooled Method. The Dedicated Single Bank Method collateralizes public deposits at 102% over the FDIC, IntraFi/CDARS/ICS coverage. There is no contingent liability in the Dedicated Single Bank Method; therefore, depositories will not be liable for losses of public deposits held by other designated state depositories.
The Multibank Pooled Method allows for a contingent liability of the proportionate share of losses of uninsured and uncollateralized public fund deposits held by a designated state depository in default. Eligibility to participate in the Multibank Pooled Method will be determined by meeting a qualifying bank rating of 2.75. Ratings are determined quarterly by the WV State Treasurer’s Office financial rating service, FedFis. The FedFis rating system ranges from one to five, where one is the highest and five is the lowest rating. Entities qualifying for the Multibank Pooled Method will pledge collateral using a graduated tiered approach for all public funds over the FDIC, IntraFi/CDARS/ICS coverage. The tiers include collateralization levels of 50%, 75% and 100% based upon the dollar amount of uninsured public deposits.
The Pledge WV Collateral System is an online program developed by the WV State Treasurer’s Office aimed at streamlining the management of pledged collateral for securing public deposits. The System provides a centralized portal for financial institutions to upload their public fund account balances on a monthly basis. Additionally, on a monthly basis, the State Treasurer’s Office uploads a report of all pledged collateral from its Safekeeping Agent. The State Treasurer’s Office compares public fund account balances to the pledged collateral to ensure proper collateralization in accordance with WV State Code. As an added benefit, public depositors will have access to the system in order to monitor collateralization of their deposits and provide annual attestations as required by State Code.
The WV State Treasurer’s Office is the sole administrator of the Pledge WV Collateral System and is responsible for managing pledged collateral for public deposits. The System is a win-win for both financial institutions and public depositors. Financial institutions save time and resources on a more streamlined process and public depositors gain peace of mind knowing their deposits are safe and secure.