Chapter 113-40 | Collateral Requirement

Rule 113-40-01 | Definitionsand public records.

• Effective: August 10, 2023
• Promulgated Under: 119.03

As used in this chapter:

(A) "Bank monitoring" means the process used to identify an emerging individual financial concern or a deposit business concern for a FI approved for a reduced collateral floor.

(B) "Bank monitoring collateral requirement" means an additional collateral requirement that may be imposed on a FI approved for a reduced collateral floor if an emerging individual financial concern or a deposit business concern is identified.

(C) "Basis point" means a simplified unit of measure used in finance. One basis point equals one one-hundredth of one per cent.

(D) "Collateral requirement calculation" means the mandatory amount of collateral for a FI participating in OPCP, as determined in OPCS based upon the following factors: account balances; federal deposit insurance corporation coverage as determined pursuant to paragraph (C)(1) of rule 113-40-02 of the Administrative Code, which may deviate from actual federal deposit insurance corporation limits; statutory collateral requirement; reduced collateral floor; any bank monitoring collateral requirement(s); any economic monitoring collateral requirement(s); any PU negotiated collateral requirement(s); and any cushion collateral requirement(s).

(E) "Collateral sufficiency" means the determination made by the treasurer of state on whether a FI is adequately collateralized based upon the collateral requirement calculation and the collateral valuation.

(F) "Collateral valuation" means the market value of eligible collateral pledged by a FI.

(G) "Cushion collateral requirement" means an additional collateral requirement that may be imposed by the treasurer of state on a FI that is not in compliance with collateral sufficiency requirements, file submission requirements, or the OPCS operating policies.

(H) "Economic monitoring" means macroeconomic monitoring and regional economic monitoring under paragraph (B) of rule 113-40-04 of the Administrative Code.

(I) "Economic monitoring collateral requirement" means an additional collateral requirement that may be imposed on a FI approved for a reduced collateral floor if economic monitoring identifies a potential concerning economic trend.

(J) "Financial institution" (FI) means a state-chartered or national bank designated as a public depository pursuant to section 135.01 of the Revised Code, and which receives or holds any public deposits as defined in section 135.31 of the Revised Code, or which receives or holds any funds from a public depositor as defined in division (A)(2) of section 135.182 in the Revised Code.

(K) "Ohio pooled collateral program" (OPCP) means the program, created by the treasurer of state pursuant to division (B)(1) of section 135.182 of the Revised Code, in which each FI that selects the pledging method prescribed in division (A)(2) of section 135.18 of the Revised Code or division (A)(2) of section 135.37 of the Revised Code, shall pledge to the treasurer of state a pool of eligible securities for the benefit of all public depositors at the public depository to secure the repayment of uninsured public deposits at the public depository, and, if applicable, collateral dedicated to a specific public depositor, provided that the total market value of the securities so pledged is at least equal to the amounts required by section 135.182 of the Revised Code.

(L) "Ohio pooled collateral system" (OPCS) means the system created and maintained by the treasurer of state to facilitate FI and PU participation in OPCP.

(M) "Operating policies" means the set of operational procedures, policies, and requirements for the use of OPCS. All participation in OPCP and use of OPCS shall be subject to the operating policies, which are maintained at the sole discretion of the treasurer of state. The operating policies are available at www.tos.ohio.gov.

(N) "Public deposits" means moneys of a public depositor as defined in division (A)(3) of section 135.182 of the Revised Code, but for the purposes of this chapter herein, does not include the moneys of metropolitan housing authorities, public or Indian housing agencies, or United States federal agencies.

(O) "Public unit" (PU) means the state or a subdivision thereof, as applicable, that deposits public deposits with a FI.

(P) "Public unit negotiated collateral requirement" means a collateral requirement negotiated by a PU with its FI, which may differ from the statutory collateral requirement.

(Q) "Qualified trustee" means a bank or institution that meets the requirements set forth in division (J) of section 135.18 of the Revised Code.

(R) "Reduced collateral floor" means a collateral requirement available to eligible FI pursuant to division (B)(1)(b) of section 135.182 of the Revised Code. A FI reduced collateral floor will be determined in accordance with rules 113-40-03 to 113-40-05 of the Administrative Code.

(S) "Specific pledge method" means the method of separately securing uninsured public deposits of each public depositor, as prescribed in division (A)(1) of section 135.18 of the Revised Code.

(T) "Specific pledge account" (SPA) means an account containing a security or securities pledged for the benefit of one specific PU by a FI participating in the pooling method. A FI may be permitted to use a SPA if: the charter for the PU requires use of the specific pledge method; United States federal law designates the specific pledge method for the PU; or it is permitted at the discretion of the treasurer of state. Under this method, the FI will secure all uninsured deposits in the SPA at least equal to the requirement for the specific pledge method.

(U) "Standard" means a specific financial indicator with a defined benchmark that must be met by a FI in order to be approved for a reduced collateral floor.

Last updated August 11, 2023 at 8:29 AM

Supplemental Information

Authorized By: R.C. 135.182
Amplifies: R.C. 135.18, R.C. 135.182
Five Year Review Date: 8/10/2028
Prior Effective Dates: 8/6/2017

Rule 113-40-02 | Requirements for a financial institution.

• Effective: August 10, 2023
• Promulgated Under: 119.03

All financial institutions (FIs) participating in OPCP shall:

(A) Transmit the required files to OPCS every day the federal reserve is open for business.

(B) Report any public unit (PU) negotiated collateral requirement at an account level.

(C) Pledge sufficient collateral when uninsured public deposits are received.

(1) The treasurer of state will estimate the federal deposit insurance corporation insurance (FDIC) coverage amount, which may deviate from the actual FDIC limits.

(2) A FI must address collateral deficiencies in accordance with the operating policies.

(D) Pledge eligible collateral to the treasurer of state with a qualified trustee to secure the FI's public deposits.

(1) The trustee shall identify and hold collateral pledged to the treasurer for the benefit of public units (PUs) with deposits in the respective FI.

(2) The trustee shall hold all collateral pledged to the treasurer in one or more identifiable pooled collateral accounts for each FI, as specified by the treasurer.

(3) A FI will pledge collateral to the treasurer with a trustee as required, and the trustee will inform the treasurer of all new pledges.

(a) The treasurer will not accept any statement, communication, or notice from a FI as evidence of pledged collateral.

(b) The treasurer will only update OPCS records on receipt of documentation submitted by the trustee.

(E) Monitor pledged collateral and submit a collateral release request to the treasurer in advance of the maturity date of the pledged collateral.

(F) Submit a collateral release request to the treasurer in order to have pledged collateral released by the trustee.

(1) A trustee will only release collateral on the instruction of the treasurer, and will not accept requests directly from a FI.

(2) Acceptance or denial of a release of collateral request will occur as determined by the treasurer.

(G) Not pledge, combine, cross-collateralize, or aggregate pledged collateral in one pool in OPCP for either another pool in OPCP or for the benefit of any other party.

(H) Be subject to ongoing monitoring for compliance of collateral sufficiency requirements and file submission requirements.

(1) If the treasurer determines a FI is not in compliance with the operating policies, collateral sufficiency requirements, or file submission requirements, then the treasurer may impose a cushion collateral requirement.

(2) Upon entrance into OPCS, the cushion collateral requirement will have a default value of zero.

Last updated August 11, 2023 at 8:29 AM

Supplemental Information

Authorized By: R.C. 135.182
Amplifies: R.C. 135.18, R.C. 135.182
Five Year Review Date: 8/10/2028

Rule 113-40-03 | Reduced collateral floor application and maintenance criteria.

• Effective: August 10, 2023
• Promulgated Under: 119.03

(A) A financial institution (FI) that has been in OPCP for four quarters may apply for a reduced collateral floor by submitting an application to the treasurer of state.

(1) If the treasurer approves the application, it will set the reduced collateral floor in OPCS. However, if the public unit (PU) has negotiated a higher collateral requirement for an account, the PU negotiated collateral requirement will take precedence.

(2) If the treasurer does not approve the application, the FI will be notified.

(B) Upon receipt of the application for a reduced collateral floor, and as part of the ongoing monitoring process, the treasurer shall use data only from rating agencies, regulatory bodies, reports filed with the federal deposit insurance corporation (FDIC), and publicly available sources to initially approve the reduced collateral floor, and subsequently maintain that approval, for a FI. The performance of the FI evaluation does not imply or construe that the treasurer is a de facto ratings agency.

(C) To be initially approved for a reduced collateral floor, a FI must meet the following criteria:

(1) Not be a de novo bank, as reported by the FDIC;

(2) Be in good standing with government regulators with respect to their deposit business;

(3) Not receive or have on deposit at any one time public moneys, including public moneys as defined in section 135.31 of the Revised Code, in an aggregate amount in excess of thirty per cent of its total assets, pursuant to section 135.03 of the Revised Code;

(4) Meet the standards determined by the treasurer that demonstrate capital adequacy, bank management, safety, and soundness as set forth in the operating policies for the current and preceding four quarters; and

(5) Have substantially complied with OPCS and OPCP guidelines and operating policies for the current and preceding four quarters.

(D) If a FI meets the foregoing criteria, but the treasurer has identified adverse macroeconomic or regional economic trends or indicators pursuant to the monitoring protocols of rule 113-40-04 of the Administrative Code, then the reduced collateral floor approval may be withheld at the sole discretion of the treasurer.

Last updated August 11, 2023 at 8:29 AM

Supplemental Information

Authorized By: R.C. 135.182
Amplifies: R.C. 135.18, R.C. 135.182
Five Year Review Date: 8/10/2028

Rule 113-40-04 | Bank monitoring and economic monitoring.

• Effective: August 10, 2023
• Promulgated Under: 119.03

(A) All financial institutions (FIs) approved for a reduced collateral floor will be subject to ongoing monitoring of various individual financial criteria. If the financial standing of the FI changes, and no longer meets the required reduced collateral floor eligibility criteria as defined in rule 113-40-03 of the Administrative Code, the treasurer of state may impose a bank monitoring collateral requirement. The treasurer will use three descriptors within OPCS to identify a FI's reduced collateral monitoring status:

(1) Non-active: The FI has not applied, or has not been approved, for a reduced collateral floor.

(2) Active: The FI has been approved for a reduced collateral floor.

(3) Bank monitoring: The FI has an emerging individual financial concern or a deposit business concern.

(a) The treasurer will notify a FI when its reduced collateral monitoring status changes from active to bank monitoring within OPCS; OPCS will generate notifications to the affected public unit(s).

(b) A FI subject to a bank monitoring collateral requirement may be subject to an increase in its reduced collateral floor requirement, from the sum of its reduced collateral floor requirement plus ten per cent or more, up to a maximum of one hundred two per cent. Any increase will be reflected in the bank monitoring field in OPCS, as determined at the sole discretion of the treasurer.

(c) A FI subject to an increase in its reduced collateral floor due to bank monitoring status may be required to pledge additional collateral through one or more calls as follows:

(i) First collateral call will require a FI to secure all uninsured public deposits at least equal to the sum of the reduced collateral floor requirement plus up to ten per cent, within ninety calendar days.

(ii) Second collateral call will require a FI to secure all uninsured public deposits at least equal to the sum of the reduced collateral floor requirement plus up to twenty-five per cent, within sixty calendar days.

(iii) Third collateral call will require a FI to secure all uninsured public deposits at up to one hundred two per cent, within thirty calendar days.

(d) The treasurer may decide to engage a FI prior to changing its status from active to bank monitoring in order to identify any extenuating considerations. This decision will be made at the sole discretion of the treasurer.

(e) The treasurer may reduce a FI's collateral floor upon a change in its bank monitoring status from bank monitoring to active, as determined at the sole discretion of the treasurer.

(B) All FIs approved for a reduced collateral floor will be subject to economic monitoring protocols to identify potential macroeconomic or regional economic concerns.

(1) The treasurer will use two publicly available macroeconomic indicators to identify a potential concerning economic trend:

(a) The "Sahm Rule Recession Indicator" as published by the federal reserve bank, in which a negative trend is defined as a single instance of when the three-month moving average of the national unemployment rate rises by one half of a percentage point or more relative to its low during the previous twelve months; and

(b) The ten-year treasury constant maturity minus two-year treasury constant maturity, in which a negative trend is defined as five instances within a rolling thirty calendar day period of the two-year treasury constant maturity exceeding the ten-year treasury constant maturity using the daily treasury yield curve rates as published by the U.S. department of the treasury, federal reserve bank, or other industry recognized market data source.

(2) The treasurer will monitor a regional economic indicator, the noncurrent loans and leases to total loans and leases for Ohio as produced by the federal deposit insurance corporation, in which a negative trend is defined as a single five per cent rate increase which is to be calculated by subtracting the indicators average prior four quarters from the indicators current quarter and then dividing by the indicators average prior four quarters.

(3) If the treasurer identifies a potential macroeconomic or regional economic concern, then the treasurer may implement an economic monitoring collateral requirement for all or some of the FIs approved for a reduced collateral floor, at the sole discretion of the treasurer. A FI subject to an economic monitoring collateral requirement may be required to pledge additional collateral through one or more calls as follows:

(a) First collateral call will require a FI to secure all uninsured public deposits at least equal to the sum of the reduced collateral floor requirement plus up to ten per cent, within ninety calendar days.

(b) Second collateral call will require a FI to secure all uninsured public deposits at least equal to the sum of the reduced collateral floor requirement plus up to twenty-five per cent, within sixty calendar days.

(c) Third collateral call will require a FI to secure all uninsured public deposits at up to one hundred two per cent, within thirty calendar days.

(4) The treasurer may remove an economic monitoring collateral requirement from any FI at the treasurer's sole discretion.

Last updated August 11, 2023 at 8:30 AM

Supplemental Information

Authorized By: R.C. 135.182
Amplifies: R.C. 135.18, R.CV. 135.182
Five Year Review Date: 8/10/2028
Prior Effective Dates: 6/3/2021

Rule 113-40-05 | Collateral sufficiency.

• Effective: August 10, 2023
• Promulgated Under: 119.03

(A) In calculating the collateral percentage required at a bank account level, OPCS will require the greater of the following two calculations:

(1) The public unit (PU) negotiated collateral requirement plus the cushion collateral requirement; or

(2) The reduced collateral floor requirement plus any bank monitoring collateral requirement, any economic monitoring requirement, and any cushion collateral requirement.

(B) In calculating collateral sufficiency, the treasurer of state will:

(1) Use existing market pricing available through a reputable source to determine the collateral valuation to calculate the collateral sufficiency.

(a) The treasurer will share the source of market pricing upon request.

(b) A financial institution (FI) may challenge this collateral valuation, but the treasurer shall make the final determination.

(2) Conduct a daily review of collateral sufficiency based upon the collateral requirement calculation and the collateral valuation.

(a) A FI may challenge this collateral sufficiency, but the treasurer shall make the final determination.

(b) A FI will be notified by the treasurer of any collateral deficiencies, and will be responsible to address the deficiencies in accordance with the operating policies.

Last updated August 11, 2023 at 8:30 AM

Supplemental Information

Authorized By: R.C. 135.182
Amplifies: R.C. 135.18, R.C. 135.182
Five Year Review Date: 8/10/2028

Rule 113-40-06 | Fees.

• Effective: August 10, 2023
• Promulgated Under: 119.03

(A) Pursuant to division (L) of section 135.182 of the Revised Code, a public depository that selects the pledging method in division (B) of section 135.182 of the Revised Code shall pay the treasurer of state fees in accordance with the following schedule:

(1) Each public depository shall pay an annual fee based on the average month end balance of public deposits from the prior year of participation in OPCP. The treasurer shall charge a public depository that participates in OPCP a pro rata annual fee for each quarter that the public depository participated in OPCP. The treasurer may charge a public depository the quarterly pro rata amount, in full, for any participation in that quarter. The annual fee for participation in OPCP shall be assessed in the following cumulative tiers of average month end balance of public deposits:

(a) The rate shall be 0.0001 (1.0 basis point) on the first fifty million dollars in average month end public deposits;

(b) The rate shall be 0.00009 (0.9 basis point) on the next fifty million dollars (the amount greater than fifty million dollars and less than or equal to one hundred million dollars) in average month end public deposits;

(c) The rate shall be 0.00001 (0.1 basis point) on th next four hundred million dollars (the amount greater than one hundred million and less than or equal to five hundred million dollars) in average month end public deposits;

(d) The rate shall be 0.000009 (0.09 basis point) on the next five hundred million dollars (the amount greater than five hundred million and less than one billion dollars) in average month end public deposits;

(e) The rate shall be 0.000008 (0.08 basis point) on the next one billion dollars (the amount greater than one billion and less than or equal to two billion dollars) in average month end public deposits; and

(f) The rate shall be 0.000006 (0.06 basis point) on amounts exceeding two billion dollars in average month end public deposits.

Average Month End Public Deposits Tier	Tier	Rate
First $0 - $50 million	1	0.000100
Next $50 million - $100 million	2	0.000090
Next $100 million - $500 million	3	0.000010
Next $500 million - $1 billion	4	0.000009
Next $1 billion - $2 billion	5	0.000008
Remaining over $2 billion	6	0.000006

(2) Each public depository that is granted a specific pledge account (SPA) at the discretion of the treasurer pursuant to paragraph (T) of rule 113-40-01 of the Administrative Code shall pay a fee of two hundred dollars per month for each discretionary SPA. The treasurer shall not charge a monthly fee for using a SPA granted because the charter for the public unit (PU) requires use of the specific pledge method or United States federal law designates the specific pledge method for the PU.

(3) Each public depository that is permitted to secure public deposits at an amount under division (B)(1)(b) of section 135.182 of the Revised Code shall pay a fee of twenty-four thousand dollars per year.

(B) The treasurer shall invoice each public depository annually, in arrears, on or around July first of each year for fees assessed under paragraph (A) of this rule for participation in OPCP.

(C) Each fee shall be due to the treasurer within forty-five days from the date of invoice. The treasurer may impose a late fee of ten per cent on any unpaid fees after forty-five days from the date of invoice. Further, failure of a public depository to pay an invoice may result in a cushion collateral requirement under paragraph (G) of rule 113-40-01 of the Administrative Code.

(D) The treasurer, at its sole discretion, may waive any fee imposed under this rule, including late fees.

(E) The treasurer may increase the fees under this rule at a rate up to the consumer price index from the United States department of labor, bureau of labor statistics.

Last updated August 11, 2023 at 8:30 AM

Supplemental Information

Authorized By: R.C. 135.182
Amplifies: R.C. 135.18. R.C. 135.182
Five Year Review Date: 8/10/2028
Prior Effective Dates: 4/15/2018