Honorable William D. Gordon
AGO 27
Opinion NO. 27
Pennsylvania Attorney General Opinions
Opinions Of the Attorney General
September 10, 1931
Banking Department—Right of State banks and Trust companies to pledge assets—Deposit of public funds.
1. A state bank incorporated under the Act of May 13, 1876, P. L. 161, as amended, is not specifically authorized by statute to pledge its funds to secure the deposit of public funds, but the courts have permitted such pledge, which may be legally made, at least when the bank is solvent.
2. A trust company incorporated under the Act of April 29, 1874, P. L. 73, as amended, is permitted by statute to pledge its securities to safeguard the deposit of public funds.
Honorable William D. Gordon, Secretary of Banking, Harrisburg, Pennsylvania.
Sir: You have requested an opinion on the right of banks and trust companies under your supervision to pledge assets as collateral to secure the deposit of public funds.
As far as trust companies are concerned, the Act of May 29, 1895, P. L. 127, amending the Act of May 9, 1889, P. L. 159, provides that trust companies have the power "to receive deposits of moneys and other personal property and issue their obligations therefor." This has been interpreted by the Supreme Court of the Commonwealth in
Camveron v. Christy, 286 Pa. 405, (1926), to mean that a trust company has authority to pledge its assets to secure county funds deposited in the name of a delinquent tax collector. The court, in the course of its opinion, held at page 409 as follows:
" * * * The power to issue an ' obligation' for a deposit fairly implies a power to pledge securities therefor when necessary to safeguard the return of the deposit when called upon by the depositor. The conditions on which the deposit was made worked no hardship on other depositors. Presumably their deposits were made more secure by the additional business secured by the company through the large deposits made by defendant. * * *"
Although the facts in that case had to do entirely with a trust company incorporated under the provisions of the Act of April 29, 1874, P. L. 73, as amended, the court went so far as to say that a bank created by the Commonwealth had the same power.
The Act of May 13, 1876, P. L. 161, as amended, which is popularly known as the General Banking Act, contains no provision authorizing banks to pledge assets to secure deposits...
