TFIE A-ITORNEY GENERAL
OF%+EXAS
AIJEJTIN. - 78711
April 7. 1975
The Honorable Je.sre Jamen Opinion No. H- 574
State Trcarurcr
Treasury Department Re: Limitr of FDIC insurance
State of Texar of rtate fundr deporited in
Austin, Texae 78711 commercial bankr.
Dear Mr. James:
You have requeeted our opinion concerning the extent to which
funds depooited by the State Treasurer in various bank account6 are
insurable under Public Law 93-495, 12 U.S. Code Cong. & Ad. Newr
5684 (19744. Under Article 2529a. V. T. C. S., recurity for deporita
of political rubdivirionr ir required only to the extent raid depoeite are
not inrured under the Federal Reserve Act, 12 U.S. C. $1811. et req.
Public Law 93-495, in addition to raising Federal Deporit
Inrurance Corporation (FDIC) coverage to $40,000 for a11 inrured
accountr, provider in part:
(2) (A) Notwithrtanding any limitation in thir Act
or in any othaprovieion of law relating to the amount
of deporit insurance available for the account of any
one deporitor, in the caee of a deporitor who ir . . .
. . . .
(ii) an officer, employee, or agent of any State
of the United Staten, or of any county, municipality,
or political rubdivieion thereof having official custody
of public fund6 and lawfully inverting or deporitinn the
rame in time and eavingr depoeitr in an inrured bank
in euch State.: . . . hie depoeit .&all be ineured in an
amount not to exceed $100,000 per account. (Emphario
added) Section 101(a), amending, 12 U.S. C. 3 1821(a).
p. 2564
The Honorable Jesre Jamer page 2 (H-574)
The FDIC har conrtrued thecle provisions in Ruler and Rsgula-
tionr Section 330.8, Public Unit Accountr, 39 Fed. Rag. 41359 (1974),
which provide6 in part:
(a) (2) Each official custodian of funds of any State
of the United Staten or any county, municipality,
or political rubdivirion thereof deporiting the
same in time or oavings depoeitr in an insured
bank in the same State shall be reparately insured
up to $100,000.
. . . ,
(5) .Each official curtodian referred to in para-
graphs (a)(2), (3) and (4) of this clection lawfully
depositing such funds in demand deporitr in an
insured bank within the eame State,District of
-Columbia, Commonwealth, po~aerrion or territory
comprising the public unit or wherein the public
unit is located, or in any form of deporit, whether
time, sayings or demand, in an insured bank
outside jurisdiction, shall be separately inmured
up to $40,000.
(6) For purposes of thin paragraph (a), if the same
person is an official curtodian of more than one
public unit, he shall be separately insured with
respect to the public funds held by him for each
such unit, but shall not be separately insured by
virtue of holding different offices in such unit or,
except as provided in paragraph (b) of this eection.
holding such funda for different purposes.
(b) Public bond iaaues. Where an officer, agent or
employee of a public unit has custody of certain
funds which by law or under the bond indenture
are required to be paid to the holders of bonds
irrrued by the public unit, any deporit of ruch
p. 2565
The Honorable Jerre Jamer page 3 (H-574)
fundr in an inrured bank shall be deemed to be
a deporit by a truetee of truer fundr of which the
bondholder6 are pro rata beneficiarier, and each
such beneficial interest 6hall be reparately inrured
up to $20,000.
It appears that paragraph 2 ir more limited in itr application
than the statute itself, the former limiting FDIC insurance to $109,000
per custodian rather than per account. Given the state policy to pro-
tect the 6ecurity of state fund6 deposited in banks, we believe the more
restrictive language of the FDIC Rule6 and Regulation6 should be
followed under article 2529a, for while we have some doubt regarding
the validity of this construction, it remains the official administrative
interpretation pending amendment or judicial alteration.
Under the FDIC rules and regulatlonr the deposits of each custodian
of public fund6 for each public unit are inrured to $100,000 in the aggregate
for time and savings depositr and to $40,000 in the aggregate fWh$8d depa~ti d
BldepositsS ban&e outside the 6tate. Public unit is defined in 12 U.S. C.
1813 (m) as ‘I . . . any State of the United States, . . . any county, . . .
any municipality, or . . . any political eubdivision thereof. ” Section
330.8(c) of the FDIC rule8 and regulationo provides:
(c) Political subdivieion. The term “political
subdivision” include6 anv subdivirion of a public
unit, as defined in 6ection 3(m) of the Federal
Deposit Insurance Act, or any principal depart-
ment of such public unit, (1) the creation of which
subdivision or department has been exprersly
authorized by State statute, (2) to which some
functions of government have been delegated by
State rtatute, and (3) to whichkinG have been
allocated by rtatute or ordinance for its exclusive
ure and control. It also includes drainage, irriga-
tion, navigation! improvement, levee, ranitary,
school or power di6triCt6, and bridge or port au-
thorities and other special district6 created by
p. 2566
.~ _ .----. - ..-_. _. _
The Honorable Jerre Jamar page 4 (H-574)
State rtatute or compactr between the Statea.
Excluded from the term are rubordinate or
nonautonomoun divirionr, lgenciem, or boards
within principal departmentr. 12 C. F. R.
S 330.8(c) (1974).
Thir definition of political rubdivirion differ8 in some rerpectr from
that adopted by the State for its own purporea. See H-365 (1974).
Of course for FDIC purporer the above definitiox to be utilired.
When the State Trearurer depoait6 fundr for different political rub-
divirions an defined by the FDIC, the fundr of each rubdivirion are
ineured to $100,000 in the aggregate for time and ravings deporitr
and to $40,000 for demand deposit6 and all depoeitr in banks outaide
the State.
For example, were the State Trearurer to deposit fund6 for the
University of Texan System, Park6 and Wildlife Department, and the
Department of Mental Health and Mental Retardation, the fundr of each
such rubdivirion would be aeparately in6ured to the maximumr.
To the extent any depo6itr are inrured by the FDIC recurity ir
not required from the bank under article 2529a, V. T. C. S.
SUMMARY
The FDIC Rules and Regdationr, 12 C. F. R.
5330.8 (1974) i6 the appropriate rtandard for
determining FDIC coverage of depo6itr of public
fundr. The deponitn of each curtodian of a public
unit are insurable to $100,000 per bank in the
aggregate for time and raving6 deponitr in bank6
within the rtate, and to $40,000 per bank in the
aggregate for demand deporits within the rtate and
all depoaita outride the &ate. Greater coverage
is available for fund6 to be paid to holders of public
irrue bond6 and in nome other circumntancer. To
p. 2567
.
The Honorable Jesse James page 5 03,- 574)
the extent that depo6itr of public unite
are insured by FDIC, no additional recurity
ir required by article 2529a.
APPROVED:
DAVID M. KENDALL, Firrt Assistant
3
Opinion Committee
p. 2568
Untitled Texas Attorney General Opinion
Combined Opinion