DEPARTMENT OF BANKING AND INSURANCE
DIVISION OF BANKING
Proposed New Rule: N.J.A.C. 3:1-4.13
Authorized By: Holly C. Bakke, Commissioner, Department of Banking and Insurance
Authority: N.J.S.A. 17:1-8.1 and 15(e), and 17:9-41 and 43(e).
Calendar Reference: See Summary below for explanation of exception to calendar requirement.
Proposal Number: PRN 2002-244
Submit comments by September 13, 2002 to:
Karen Garfing, Assistant Commissioner
New Jersey Department of Banking and Insurance
PO Box 325
Trenton, NJ 08625-0325
Fax: (609) 292-0896
The agency proposal follows:
The Governmental Unit Deposit Protection Act, N.J.S.A. 17:9-41 et seq., provides that public depositories that have public funds on deposit shall maintain security for those deposits. Public depositories are State or Federally chartered banks, savings banks, or savings and loans with an office in New Jersey and which hold public funds, which are funds of a governmental unit. Security is required to be in the form of eligible collateral. The statute sets forth specific types of eligible collateral such as obligations of, or guaranteed by, the United States or the State of New Jersey or any of its political subdivisions. It also provides that the Commissioner of Banking and Insurance ("Commissioner") may, by rule, approve other types of eligible collateral.
The Commissioner has decided to allow irrevocable stand-by letters of credit issued by the Federal Home Loan Bank of New York as an additional form of eligible collateral under the Governmental Unit Deposit Protection Act, N.J.S.A. 17:9-41 et seq. The change provides additional flexibility for smaller banks. The Department therefore proposes this new rule to specify irrevocable stand-by letters of credit issued by the Federal Home Loan Bank of New York as an additional form of eligible collateral.
This rule proposal provides for a comment period of 60 days, and, therefore, pursuant to N.J.A.C. 1:30-3.3(a)5, is not subject to the provisions of N.JA.C. 1:30-3.1 and 3.2 governing rulemaking calendars.
The impact of this proposed new rule would be on public depositories. The proposed new rule sets forth an additional type of obligation that can be considered eligible collateral for public deposits.
The proposed rule will provide additional flexibility to public depositories while still protecting the public funds being held. It would, therefore, have a positive social impact.
The proposed new rule will provide flexibility to public depositories as to the types of collateral they are required to maintain to secure public deposits, which may have a beneficial effect on the depositories. The change will not adversely impact the safety and soundness of the public deposits.
Federal Standards Statement
A Federal standards analysis is not required because the proposed new rule is not subject to any Federal requirements or standards.
The Department does not anticipate that any jobs will be generated or lost as a result of the proposed new rule. The Department invites commenters to submit any data or studies concerning the jobs impact of the proposed new rule together with their written comments on other aspects of this proposal.
Agriculture Industry Impact
The Department does not expect any agriculture industry impact as a result of the proposed new rule.
Regulatory Flexibility Analysis
The proposed new rule will apply to public depositories. Some public depositories are small businesses as defined in the Regulatory Flexibility Act, N.J.S.A. 52:14B-16 et seq. No new compliance requirements are established in the proposed new rule. Public depositories that obtain irrevocable stand-by letters of credit in accordance with the proposed new rule will continue to be required to maintain records of their collateral and provide the reporting required by the Department for all public depositories and the collateral they maintain for public funds.
The Department does not believe that any additional professional services will be needed to comply with the proposed new rule as the required documentation can be prepared in-house in the regular course of business of the public depository.
There has been no distinction in the recordkeeping or other compliance requirements for small businesses, as the requirements relate to the Departmentís oversight of public depositories. The Departmentís interest in oversight of these depositories applies regardless of business size. Accordingly, since no undue burden would be imposed, and no distinction could be made without creating a risk to the Departmentís oversight, no differentiation in compliance requirements is made based on business size.
Smart Growth Impact
The proposed new rule will have no impact on the achievement of smart growth and implementation of the State Development and Redevelopment Plan.
Full text of the proposed new rule follows:
3:1-4.13 Eligible collateral
In addition to obligations otherwise authorized in N.J.S.A. 17:9-41, eligible collateral shall also include irrevocable stand-by letters of credit issued by the Federal Home Loan Bank of New York. The Commissioner shall review and approve the form of all such letters of credit proposed by a public depository as eligible collateral under this section. Further, the original letter of credit shall be held by the Commissioner.