AGO 87-1.
Case Date | January 06, 1987 |
Court | Colorado |
Colorado Attorney General Opinions
1987.
AGO 87-1.
January 6, 1987Department of Law
Attorney General Opinion FORMAL OPINION
of DUANE WOODARD
Attorney General Opinion No. 87-1
AG Alpha No. TR AD AGAPA
B. J. Thornberry
Deputy State Treasurer
Department of the Treasury
140 State Capitol
Denver, CO 80203 RE: Whether a pledge of eligible
collateral pursuant to the Colorado Public Deposit Protection Act protects
public deposits if a public depository fails.Dear Ms. Thornberry:
I am writing in response to your letter requesting a legal
opinion concerning the adequacy of present procedures for pledging collateral
to secure public deposits in the event of the failure of a bank or savings and
loan association. You advise that presently the state treasurer follows the
statutory procedures established by the Public Deposit Protection Act of 1975,
article 10.5, title 11, C.R.S. (1986 Supp.), and the Savings and Loan
Association Public Deposit Protection Act, article 47, title 11, C.R.S. (1986
Supp.). The statutory requirements pertaining to each type of financial
institution are very similar in most respects and will be referred to
collectively as the Public Deposit Protection Act or the "PDPA". You are
concerned whether the Federal Deposit Insurance Corporation (FDIC) and the
Federal Savings and Loan Insurance Corporation (FSLIC) would honor pledges of
collateral made pursuant to the PDPA in the event a financial institution fails
and there is inadequate federal insurance coverage for all public deposits.
QUESTION PRESENTED AND CONCLUSION
Is the pledge of eligible collateral by a public depository
pursuant to the requirements of the PDPA sufficient to protect uninsured public
deposits against the claims of other creditors in the event of the failure of a
public depository?
Yes. The PDPA establishes a trust fund or special deposit for
public deposits secured by eligible collateral pledged pursuant to the PDPA.
The receiver of a failed institution would be required to apply the proceeds of
the eligible collateral to pay public deposits rather than satisfying the
claims of other creditors.
ANALYSIS
Governmental units, including the state, are authorized to
deposit public funds in banks and savings and loan associations having their
principal offices in the state. Sections 11-10.5-118 and 11-47-118, C.R.S.
(1986 Supp.). Public deposits must be made with eligible public depositories
pursuant to statutory requirements designed to protect public deposits by
requiring that deposits be either federally insured or secured by eligible
collateral.
You have advised that in the event of the failure of a public
depository, the state would expect to recover uninsured public deposits from
the sale of eligible collateral pledged pursuant to the PDPA. The FDIC is
responsible for liquidating the assets of failed national banks. Its
counterpart for national savings and loan associations is the FSLIC. In the
event of the failure of a state chartered bank or savings and...
To continue reading
Request your trial