Federal Reserve Bank Procedures

Liquidation Procedures For Failed Depositaries

Introduction

This chapter prescribes procedures for failed depositaries.

Section 3010—Scope and Applicability

This chapter outlines procedures for Federal Reserve Banks (FRBs) and branches to follow when a financial institution falls within the definition of “failed depositary” in section 3020 below.

Note that this only applies to financial institutions that:

  • Are designated as a depositary and financial agent of the U.S. Government;
  • Participate in a Treasury investment program; or
  • Hold deposits of funds in trust pursuant to any other statute or regulation.

Also note that these procedures apply only to those financial institutions that will not reopen.

Section 3015—Authority

12 U.S.C. §391

Section 3025—General Approach

FRBs will follow Federal Reserve procedures for liquidating collateral. If the failed bank is holding public funds, Treasury investment funds, or funds held in trust for a Government program, the FRB will communicate the failure as well as the relevant information about the collateral pledged, ATBC, Government agencies affected, etc. The Federal Reserve will first work with the receiver to ensure full satisfaction of Government claims against the depositary. If liquidation is necessary, the Federal Reserve will forward the proceeds from the sale of securities to the Treasury for proper accounting of the relevant Government agencies’ funds at risk.

Section 3030—Announcement of a Depositary Failure

Upon receipt of official notification from regulatory authorities that a depositary covered under this chapter is being closed or has otherwise failed, the FRB must send an email indicating the name, location, and status of the failed depositary to the Bureau of the Fiscal Service (Fiscal Service) at BMT@fiscal.treasury.gov.

In addition to identifying the failed depositary, the email should include the date of failure, the disposition of the failed depositary (acquired by another institution or placed into receivership, etc.), the collateral program for which the depositary holds collateral, the ATBC, and the amount of collateral pledged.

Section 3035—Subsequent Communication

The FRB must inform the Fiscal Service of the following information as soon as it becomes known to the FRB and periodically until full satisfaction is attained:

  1. A list of obligations pledged by the failed depositary;
  2. Collateral programs under which those obligations are pledged;
  3. Descriptive information about the obligation (CUSIP, issue and maturity date, value, etc.);
  4. Location of the securities (book entry, borrower-in-custody, FRB vault, third party, etc.);
  5. Closing balances of all public money and Government deposit accounts at the failed depositary, contacting the receiver or applicable Federal agencies as needed to make this determination;
  6. Steps taken to obtain from the receiver the full settlement of the Government’s claims against the failed depositary, or steps taken to possess or liquidate the collateral by the FRB, including the amount of funds still at risk; and
  7. Final disposition in the form of an FRB letter of certification (see Appendix 2 for a sample letter).
Section 3040—Additional Protections of the Government’s Interests

The FRB must act to protect the Government’s interests, performing all tasks needed to prevent loss of funds at risk held by failed depositaries. Examples of such required FRB actions are listed below:

  1. Serving notice to all obligors to remit payments of principal and interest to the FRB;
  2. Holding payments of principal and interest in a suspense account;
  3. Obtaining a letter of indemnity from the receiver (see sample letter in Appendix 1); and/or
  4. Preventing third party custodians from releasing collateral.

Contact Us

Detailed Contacts

Direct inquiries concerning this chapter to:

Department of the Treasury 
Bureau of the Fiscal Service 
Bank Policy and Oversight Division

3201 Pennsy Drive, Building E 
Landover, MD 20785


 
202-874-8471

 

Protecting Collateral Pledged By Depositaries To Secure Public Money On Deposit

Introduction

This chapter provides Federal Reserve Banks (FRBs) with requirements and standard operating procedures for safekeeping, reporting, and monitoring collateral pledged by depositaries to secure public money on deposit.

Section 4010—Applicability

When a Federal agency places funds on deposit with a financial institution, the financial institution must pledge collateral under the conditions described in this chapter. The pledging of collateral by a financial institution is necessary to protect the Federal Government against risk of loss. State, local, and municipal deposits are not covered under this chapter.

Section 4015—Authority

See, inter alia, 12 U.S.C. 90, 265, 266, and 1789a; 31 U.S.C. 321 and 3303; and 31 CFR 202 and 380.

Section 4025—Responsibilities for Public Money

Treasury’s Bureau of the Fiscal Service (Fiscal Service) promulgates rules and provides guidance for the security of public money on deposit in depositaries. This is done through 31 CFR 202, which sets out high-level guidance, and through the TFM, which provides more detailed guidance and procedures that agencies, depositaries, and FRBs must follow to ensure that funds are secured. All agencies, depositaries, and FRBs must remain informed of and compliant with the latest collateral regulations, rules, and procedures.

Relevant TFM chapters include:

Fiscal Service determines the types of acceptable collateral depositaries can use to secure deposits of public money. Fiscal Service also determines appropriate margins on pledged collateral. See 31 CFR 380 and the TreasuryDirect website for additional information.

The following subsections outline the distribution of responsibilities for securing deposits of public money.

4025.10—FRBs

All FRBs must secure pledged collateral to protect public funds.

4025.20—TCMM Operations Team

The TCMM Operations Team must:

  • Ensure that pledged collateral is eligible and sufficient to secure deposits of public money;
  • Maintain and distribute FS Form 5902: Resolution Authorizing Execution of Depositary, Financial Agency, and Collateral Agreement; and FS Form 5903: Depositary, Financial Agency, and Collateral Agreement. See Treasury Collateral Management and Monitoring website to obtain these forms;
  • Maintain a current list of collateral contacts;
  • Make available the FRB Security Account Holdings Report and the Collateral Monitoring Recap Report to agencies on a monthly basis through TCMM system;
  • Make available the Collateral Monitoring Recap Report to depositaries on a monthly basis through TCMM system;
  • Open collateral accounts in NBES, CMS, and TCMM system; and
  • Value collateral.

4025.30—Depositaries

Depositaries must:

  • Complete FS Form 5902 and FS Form 5903 (see Treasury Collateral Management and Monitoring website) and submit these forms to the TCMM Operations Team to establish collateral security accounts;
  • Pledge sufficient eligible collateral security as required by the Secretary of the Treasury;
  • Provide agencies and FRBs with requested information; and
  • Advise agencies when the depositary is not able or willing to pledge collateral.

4025.40—Agencies

Each agency must:

  • Establish a TCMM account and V account by completing the TCMM Agency Access Form, available on Treasury Collateral Management and Monitoring website;
  • Provide the TCMM Operations Team with a timely annual update of contact information;
  • Notify the TCMM Operations Team immediately when there are changes to authorized individuals. See Treasury Collateral Management and Monitoring website to obtain the form to update contact information;
  • Provide timely address changes to the TCMM Operations Team;
  • Notify Fiscal Service, in writing, when canceling a V account. The agency must state that it no longer has collateral holdings and no longer needs the V account;
  • Develop and maintain internal operating procedures to ensure the security of public money. Fiscal Service may request a copy of agency procedures;
  • Ensure that TCMM system has the most accurate and up-to-date amount on deposit to be collateralized. This allows the TCMM Operations Team to maintain sufficient collateral in excess of the recognized deposit insurance limit (generally $250,000). See 12 CFR 330 (Deposit Insurance Coverage); and
  • Monitor agency collateral records by reviewing the monthly FRB Security Account Holdings Report and the Collateral Monitoring Recap Report. Both reports are available in the TCMM application.

4025.50—Fiscal Service

Fiscal Service must:

  • Assign and maintain V account numbers and provide agency information to the FRB so that the FRB may establish accounts; and
  • Establish the collateral policy (except for acceptability and valuation).

4025.60—Fiscal Service

Fiscal Service must also:

  • Establish and maintain lists of acceptable collateral and assigned margins; and
  • Periodically update the criteria and guidance for acceptable collateral and applicable margins. See TreasuryDirect website.
Section 4030—Agency Accounts

If an agency requests a collateral pledge and does not have a V account, the TCMM Operations Team must advise the agency to contact Fiscal Service. Fiscal Service instructs the agency on how to complete the TCMM Agency Access Form and assigns the agency an account number.

The TCMM Operations Team contacts the agency for the amount to be collateralized. The TCMM Operations Team also requests the completed FS Form 5902 and FS Form 5903 from the depositary (see Treasury Collateral Management and Monitoring website), if needed. After the completed forms are received, the TCMM Operations Team contacts the FRB New York’s NBES Central Business Application Function (CBAF) to input the V account number into NBES. The agency can verify in TCMM system that collateral has been pledged.

Section 4035—Financial Institution Agreement

To accept deposits of public money, a financial institution must be designated by Treasury as a depositary and financial agent of the Federal Government under 31 CFR 202. Before accepting deposits in excess of the recognized insurance coverage, each depositary must complete FS Form 5902 and FS Form 5903, available on Treasury Collateral Management and Monitoring website.

When a financial institution contacts the TCMM Operations Team about pledging collateral to secure agency deposits, the TCMM Operations Team ensures it has a completed FS Form 5902 and FS Form 5903 on file from the financial institution. If it does not, the TCMM Operations Team sends those forms to the financial institution along with a cover letter and a copy of 31 CFR 202 and 380.

The financial institution must complete and return the forms to the TCMM Operations Team before a collateral account is established or securities are deposited. The TCMM Operations Team maintains all pledging documentation. This includes the FS Form 5902 and FS Form 5903 and any other pertinent collateral transaction documents.

Section 4040—Acceptable Collateral

Unless otherwise specified by the Secretary of the Treasury, depositaries may pledge collateral in the form of transferable securities of any of the acceptable classes as noted in Fiscal Service guidance. The FRB accepts collateral at values (mark to market) it assigns. See TreasuryDirect website.

Securities not negotiable without endorsement or assignment are acceptable if the depositary either places its unqualified endorsement on each security or furnishes an appropriate resolution and irrevocable power of attorney authorizing the FRB to assign the securities.

Section 4045—Receiving Collateral

If an agency expects its account balance to exceed the recognized deposit insurance limit (generally $250,000), it must set the new amount to be collateralized in TCMM system to ensure effective monitoring of collateral. As long as a depositary supplies the V account number and has completed FS Form 5902 and FS Form 5903, the TCMM Operations Team must accept the pledge of acceptable collateral.

When the TCMM Operations Team receives pledging instructions from the depositary, it must determine if the agency has been assigned a V account number. If not, the TCMM Operations Team must advise the agency to contact Fiscal Service for an account number assignment. If the depositary has not previously pledged securities to an agency, it must complete the FS Form 5902 and FS Form 5903. The TCMM Operations Team sends these forms to the depositary (see Section 4035). The TCMM Operations Team also determines if the securities pledged are acceptable as collateral (see Section 4040). All district FRBs deposit the securities into the depositary’s safekeeping account pledged to the agency.

The FRB may receive a deposit of securities from an off-line depositary without prior receipt instructions. In this case, the securities operations staff at the district FRB should not reverse the deposit automatically but should contact the depositary to determine the proper disposition of the deposit.

Section 4050—Excess Collateral

A depositary must pledge all collateral to a specific agency V account. If a depositary pledges collateral in excess of the requested amount, the entire pledge is applied to the indicated agency account. For example, Agency “X” requests a pledge of $103,000. The depositary chooses to pledge $105,000 because of the profile of its securities portfolio. Agency “X” is credited with the entire $105,000 pledge, not just the $103,000 requested.

Section 4055—Maturing Securities

The TCMM Operations Team monitors agency V accounts to identify maturing securities. Because most of the pledged securities are made in book-entry form, the FRB must have procedures in place to prevent under-collateralization of the agency account. This could result from either the redemption or payment of pledged securities. In this case, the FRB sends a report notifying each depositary of its upcoming maturing securities. Depending on the circumstances, the TCMM Operations Team must take the actions discussed below.

4055.10—Substitution Required

If the TCMM Operations Team determines that a depositary’s collateral account must remain at the current level, the FRB contacts the depositary at least 10 business days before the maturity date of the current pledged securities. The FRB report instructs the depositary in substituting collateral. If the depositary does not substitute new collateral one business day before the maturation/redemption date, the TCMM Operations Team calls the depositary to discuss the need for additional collateral or the withholding of proceeds.

4055.20—Substitution Not Required

If the collateral amount can be reduced without under-collateralizing the V account, the TCMM Operations Team releases the collateral.

4055.30—Substitution Required But Not Received

Book-entry securities must be redeemed and paid on their maturity date. However, the TCMM Operations Team withholds payment if it does not receive a collateral substitution from a depositary on time. The TCMM Operations Team holds redemption proceeds in a general ledger account until the depositary deposits substitute collateral into the account pledged to the agency, or until the agency lowers the amount to be collateralized.

Section 4060—Depositary Mergers

It is important that agency and TCMM Operations Team collateral records correctly reflect the outcome of depositary mergers. This ensures that collateral deficiencies do not develop. When an agency maintains accounts with two depositaries, each account is separately insured by recognized deposit insurance (generally $250,000). If two depositaries serving the same agency merge, the surviving depositary may need to pledge additional collateral to replace the insurance coverage lost because of the merger.

Section 4065—Availability of Monthly Reports

TCMM Operations Team provides the FRB Security Account Holdings Report and the Collateral Monitoring Recap Report monthly. Agencies and depositaries use these reports to ensure that their deposits are adequately protected and to evaluate whether any changes are needed to their amounts to be collateralized.

Section 4070—Handling Collateral Pledged by an Insolvent Depositary

If a depositary that has pledged collateral to an agency becomes insolvent, the TCMM Operations Team should refer to Volume II, Part 8, Chapter 3000, for guidance. Neither the TCMM Operations Team nor the agency can authorize the release of collateral in the event of a depositary’s insolvency. Only Fiscal Service can instruct the TCMM Operations Team to release collateral held under 31 CFR 202 for an insolvent depositary.

Contact Us

Detailed Contacts

Direct inquiries concerning this chapter to:

Department of the Treasury 
Bureau of the Fiscal Service 
Revenue Collections Management 
Bank Policy and Oversight Division

3201 Pennsy Drive, Building E 
Landover, MD 20785


202-874-8471 

 

Contact the TCMM Operations Team at:

TCMM Operations Team 
Federal Reserve Bank of St. Louis

1421 Dr. Martin Luther King Drive 
St. Louis, MO 63016-3716


888-568-7343, option 2 
866-707-6574

 

For information describing acceptable collateral and its valuation, see TreasuryDirect website.

For information on collateral policy, see Treasury Collateral Management and Monitoring website.

Protection Of Non-Public Personal Information

Introduction

This chapter applies to the maintenance and use of non-public personal information obtained by a Federal Reserve Bank (FRB) in its capacity as fiscal agent for the U.S. Department of the Treasury, Bureau of the Fiscal Service (Fiscal Service).

Section 6010—Authority

Title 12 of the United States Code (U.S.C.), Section 391, authorizes the Secretary of the Treasury to use FRBs as depositaries and fiscal agents of the United States. The Secretary of the Treasury may prescribe reasonable duties to be performed by FRBs in connection with their fiscal agency responsibilities.

Section 6015—Background and Concepts

When acting in the role of fiscal agent, an FRB may be required to design, develop, operate, or maintain a system of records on individuals to accomplish an Fiscal Service required function in compliance with the Privacy Act of 1974 (5 U.S.C. § 552a) and applicable Treasury Department regulations. The term "system of records" means a group of any records under the control of any Federal agency from which information is retrieved by the name of the individual or by some identifying number, symbol, or other identifying particular assigned to the individual.

Section 6020—Protection of Non-Public Personal Information

As fiscal agents for the Bureau of the Fiscal Service, the FRBs shall protect the security and confidentiality of non-public personal information (including any information contained in a system of records) obtained by them in their fiscal agency role against any anticipated threats or hazards to the security or integrity of such information, and against unauthorized access to or use or reuse of such information for any purposes other than as authorized by Fiscal Service. Non-public personal information includes, but is not limited to, such information as payee names and Social Security numbers that would appear on Treasury checks processed by FRBs. FRBs shall inform their employees, contractors, and agents to whom non-public personal information is or may be disclosed of their responsibilities in complying with this provision.

Contact Us

Contact Details

Direct inquiries concerning this chapter to:

Department of the Treasury 
Bureau of the Fiscal Service 
FRB Liaison and Program Manager

3201 Pennsy Drive, Building E 
Landover, MD 20785


202-874-7006 
202-874-6743

 

For security related issues, contact the Fiscal Service IT Service Desk at 304-480-7777.

Liquidation Procedures For Failed Depositaries

Introduction

This chapter prescribes procedures for failed depositaries.

Section 3010—Scope and Applicability

This chapter outlines procedures for Federal Reserve Banks (FRBs) and branches to follow when a financial institution falls within the definition of “failed depositary” in section 3020 below.

Note that this only applies to financial institutions that:

  • Are designated as a depositary and financial agent of the U.S. Government;
  • Participate in a Treasury investment program; or
  • Hold deposits of funds in trust pursuant to any other statute or regulation.

Also note that these procedures apply only to those financial institutions that will not reopen.

Section 3015—Authority

12 U.S.C. §391

Section 3025—General Approach

FRBs will follow Federal Reserve procedures for liquidating collateral. If the failed bank is holding public funds, Treasury investment funds, or funds held in trust for a Government program, the FRB will communicate the failure as well as the relevant information about the collateral pledged, ATBC, Government agencies affected, etc. The Federal Reserve will first work with the receiver to ensure full satisfaction of Government claims against the depositary. If liquidation is necessary, the Federal Reserve will forward the proceeds from the sale of securities to the Treasury for proper accounting of the relevant Government agencies’ funds at risk.

Section 3030—Announcement of a Depositary Failure

Upon receipt of official notification from regulatory authorities that a depositary covered under this chapter is being closed or has otherwise failed, the FRB must send an email indicating the name, location, and status of the failed depositary to the Bureau of the Fiscal Service (Fiscal Service) at BMT@fiscal.treasury.gov.

In addition to identifying the failed depositary, the email should include the date of failure, the disposition of the failed depositary (acquired by another institution or placed into receivership, etc.), the collateral program for which the depositary holds collateral, the ATBC, and the amount of collateral pledged.

Section 3035—Subsequent Communication

The FRB must inform the Fiscal Service of the following information as soon as it becomes known to the FRB and periodically until full satisfaction is attained:

  1. A list of obligations pledged by the failed depositary;
  2. Collateral programs under which those obligations are pledged;
  3. Descriptive information about the obligation (CUSIP, issue and maturity date, value, etc.);
  4. Location of the securities (book entry, borrower-in-custody, FRB vault, third party, etc.);
  5. Closing balances of all public money and Government deposit accounts at the failed depositary, contacting the receiver or applicable Federal agencies as needed to make this determination;
  6. Steps taken to obtain from the receiver the full settlement of the Government’s claims against the failed depositary, or steps taken to possess or liquidate the collateral by the FRB, including the amount of funds still at risk; and
  7. Final disposition in the form of an FRB letter of certification (see Appendix 2 for a sample letter).
Section 3040—Additional Protections of the Government’s Interests

The FRB must act to protect the Government’s interests, performing all tasks needed to prevent loss of funds at risk held by failed depositaries. Examples of such required FRB actions are listed below:

  1. Serving notice to all obligors to remit payments of principal and interest to the FRB;
  2. Holding payments of principal and interest in a suspense account;
  3. Obtaining a letter of indemnity from the receiver (see sample letter in Appendix 1); and/or
  4. Preventing third party custodians from releasing collateral.

Contact Us

Detailed Contacts

Direct inquiries concerning this chapter to:

Department of the Treasury 
Bureau of the Fiscal Service 
Bank Policy and Oversight Division

3201 Pennsy Drive, Building E 
Landover, MD 20785


 
202-874-8471

 

Protecting Collateral Pledged By Depositaries To Secure Public Money On Deposit

Introduction

This chapter provides Federal Reserve Banks (FRBs) with requirements and standard operating procedures for safekeeping, reporting, and monitoring collateral pledged by depositaries to secure public money on deposit.

Section 4010—Applicability

When a Federal agency places funds on deposit with a financial institution, the financial institution must pledge collateral under the conditions described in this chapter. The pledging of collateral by a financial institution is necessary to protect the Federal Government against risk of loss. State, local, and municipal deposits are not covered under this chapter.

Section 4015—Authority

See, inter alia, 12 U.S.C. 90, 265, 266, and 1789a; 31 U.S.C. 321 and 3303; and 31 CFR 202 and 380.

Section 4025—Responsibilities for Public Money

Treasury’s Bureau of the Fiscal Service (Fiscal Service) promulgates rules and provides guidance for the security of public money on deposit in depositaries. This is done through 31 CFR 202, which sets out high-level guidance, and through the TFM, which provides more detailed guidance and procedures that agencies, depositaries, and FRBs must follow to ensure that funds are secured. All agencies, depositaries, and FRBs must remain informed of and compliant with the latest collateral regulations, rules, and procedures.

Relevant TFM chapters include:

Fiscal Service determines the types of acceptable collateral depositaries can use to secure deposits of public money. Fiscal Service also determines appropriate margins on pledged collateral. See 31 CFR 380 and the TreasuryDirect website for additional information.

The following subsections outline the distribution of responsibilities for securing deposits of public money.

4025.10—FRBs

All FRBs must secure pledged collateral to protect public funds.

4025.20—TCMM Operations Team

The TCMM Operations Team must:

  • Ensure that pledged collateral is eligible and sufficient to secure deposits of public money;
  • Maintain and distribute FS Form 5902: Resolution Authorizing Execution of Depositary, Financial Agency, and Collateral Agreement; and FS Form 5903: Depositary, Financial Agency, and Collateral Agreement. See Treasury Collateral Management and Monitoring website to obtain these forms;
  • Maintain a current list of collateral contacts;
  • Make available the FRB Security Account Holdings Report and the Collateral Monitoring Recap Report to agencies on a monthly basis through TCMM system;
  • Make available the Collateral Monitoring Recap Report to depositaries on a monthly basis through TCMM system;
  • Open collateral accounts in NBES, CMS, and TCMM system; and
  • Value collateral.

4025.30—Depositaries

Depositaries must:

  • Complete FS Form 5902 and FS Form 5903 (see Treasury Collateral Management and Monitoring website) and submit these forms to the TCMM Operations Team to establish collateral security accounts;
  • Pledge sufficient eligible collateral security as required by the Secretary of the Treasury;
  • Provide agencies and FRBs with requested information; and
  • Advise agencies when the depositary is not able or willing to pledge collateral.

4025.40—Agencies

Each agency must:

  • Establish a TCMM account and V account by completing the TCMM Agency Access Form, available on Treasury Collateral Management and Monitoring website;
  • Provide the TCMM Operations Team with a timely annual update of contact information;
  • Notify the TCMM Operations Team immediately when there are changes to authorized individuals. See Treasury Collateral Management and Monitoring website to obtain the form to update contact information;
  • Provide timely address changes to the TCMM Operations Team;
  • Notify Fiscal Service, in writing, when canceling a V account. The agency must state that it no longer has collateral holdings and no longer needs the V account;
  • Develop and maintain internal operating procedures to ensure the security of public money. Fiscal Service may request a copy of agency procedures;
  • Ensure that TCMM system has the most accurate and up-to-date amount on deposit to be collateralized. This allows the TCMM Operations Team to maintain sufficient collateral in excess of the recognized deposit insurance limit (generally $250,000). See 12 CFR 330 (Deposit Insurance Coverage); and
  • Monitor agency collateral records by reviewing the monthly FRB Security Account Holdings Report and the Collateral Monitoring Recap Report. Both reports are available in the TCMM application.

4025.50—Fiscal Service

Fiscal Service must:

  • Assign and maintain V account numbers and provide agency information to the FRB so that the FRB may establish accounts; and
  • Establish the collateral policy (except for acceptability and valuation).

4025.60—Fiscal Service

Fiscal Service must also:

  • Establish and maintain lists of acceptable collateral and assigned margins; and
  • Periodically update the criteria and guidance for acceptable collateral and applicable margins. See TreasuryDirect website.
Section 4030—Agency Accounts

If an agency requests a collateral pledge and does not have a V account, the TCMM Operations Team must advise the agency to contact Fiscal Service. Fiscal Service instructs the agency on how to complete the TCMM Agency Access Form and assigns the agency an account number.

The TCMM Operations Team contacts the agency for the amount to be collateralized. The TCMM Operations Team also requests the completed FS Form 5902 and FS Form 5903 from the depositary (see Treasury Collateral Management and Monitoring website), if needed. After the completed forms are received, the TCMM Operations Team contacts the FRB New York’s NBES Central Business Application Function (CBAF) to input the V account number into NBES. The agency can verify in TCMM system that collateral has been pledged.

Section 4035—Financial Institution Agreement

To accept deposits of public money, a financial institution must be designated by Treasury as a depositary and financial agent of the Federal Government under 31 CFR 202. Before accepting deposits in excess of the recognized insurance coverage, each depositary must complete FS Form 5902 and FS Form 5903, available on Treasury Collateral Management and Monitoring website.

When a financial institution contacts the TCMM Operations Team about pledging collateral to secure agency deposits, the TCMM Operations Team ensures it has a completed FS Form 5902 and FS Form 5903 on file from the financial institution. If it does not, the TCMM Operations Team sends those forms to the financial institution along with a cover letter and a copy of 31 CFR 202 and 380.

The financial institution must complete and return the forms to the TCMM Operations Team before a collateral account is established or securities are deposited. The TCMM Operations Team maintains all pledging documentation. This includes the FS Form 5902 and FS Form 5903 and any other pertinent collateral transaction documents.

Section 4040—Acceptable Collateral

Unless otherwise specified by the Secretary of the Treasury, depositaries may pledge collateral in the form of transferable securities of any of the acceptable classes as noted in Fiscal Service guidance. The FRB accepts collateral at values (mark to market) it assigns. See TreasuryDirect website.

Securities not negotiable without endorsement or assignment are acceptable if the depositary either places its unqualified endorsement on each security or furnishes an appropriate resolution and irrevocable power of attorney authorizing the FRB to assign the securities.

Section 4045—Receiving Collateral

If an agency expects its account balance to exceed the recognized deposit insurance limit (generally $250,000), it must set the new amount to be collateralized in TCMM system to ensure effective monitoring of collateral. As long as a depositary supplies the V account number and has completed FS Form 5902 and FS Form 5903, the TCMM Operations Team must accept the pledge of acceptable collateral.

When the TCMM Operations Team receives pledging instructions from the depositary, it must determine if the agency has been assigned a V account number. If not, the TCMM Operations Team must advise the agency to contact Fiscal Service for an account number assignment. If the depositary has not previously pledged securities to an agency, it must complete the FS Form 5902 and FS Form 5903. The TCMM Operations Team sends these forms to the depositary (see Section 4035). The TCMM Operations Team also determines if the securities pledged are acceptable as collateral (see Section 4040). All district FRBs deposit the securities into the depositary’s safekeeping account pledged to the agency.

The FRB may receive a deposit of securities from an off-line depositary without prior receipt instructions. In this case, the securities operations staff at the district FRB should not reverse the deposit automatically but should contact the depositary to determine the proper disposition of the deposit.

Section 4050—Excess Collateral

A depositary must pledge all collateral to a specific agency V account. If a depositary pledges collateral in excess of the requested amount, the entire pledge is applied to the indicated agency account. For example, Agency “X” requests a pledge of $103,000. The depositary chooses to pledge $105,000 because of the profile of its securities portfolio. Agency “X” is credited with the entire $105,000 pledge, not just the $103,000 requested.

Section 4055—Maturing Securities

The TCMM Operations Team monitors agency V accounts to identify maturing securities. Because most of the pledged securities are made in book-entry form, the FRB must have procedures in place to prevent under-collateralization of the agency account. This could result from either the redemption or payment of pledged securities. In this case, the FRB sends a report notifying each depositary of its upcoming maturing securities. Depending on the circumstances, the TCMM Operations Team must take the actions discussed below.

4055.10—Substitution Required

If the TCMM Operations Team determines that a depositary’s collateral account must remain at the current level, the FRB contacts the depositary at least 10 business days before the maturity date of the current pledged securities. The FRB report instructs the depositary in substituting collateral. If the depositary does not substitute new collateral one business day before the maturation/redemption date, the TCMM Operations Team calls the depositary to discuss the need for additional collateral or the withholding of proceeds.

4055.20—Substitution Not Required

If the collateral amount can be reduced without under-collateralizing the V account, the TCMM Operations Team releases the collateral.

4055.30—Substitution Required But Not Received

Book-entry securities must be redeemed and paid on their maturity date. However, the TCMM Operations Team withholds payment if it does not receive a collateral substitution from a depositary on time. The TCMM Operations Team holds redemption proceeds in a general ledger account until the depositary deposits substitute collateral into the account pledged to the agency, or until the agency lowers the amount to be collateralized.

Section 4060—Depositary Mergers

It is important that agency and TCMM Operations Team collateral records correctly reflect the outcome of depositary mergers. This ensures that collateral deficiencies do not develop. When an agency maintains accounts with two depositaries, each account is separately insured by recognized deposit insurance (generally $250,000). If two depositaries serving the same agency merge, the surviving depositary may need to pledge additional collateral to replace the insurance coverage lost because of the merger.

Section 4065—Availability of Monthly Reports

TCMM Operations Team provides the FRB Security Account Holdings Report and the Collateral Monitoring Recap Report monthly. Agencies and depositaries use these reports to ensure that their deposits are adequately protected and to evaluate whether any changes are needed to their amounts to be collateralized.

Section 4070—Handling Collateral Pledged by an Insolvent Depositary

If a depositary that has pledged collateral to an agency becomes insolvent, the TCMM Operations Team should refer to Volume II, Part 8, Chapter 3000, for guidance. Neither the TCMM Operations Team nor the agency can authorize the release of collateral in the event of a depositary’s insolvency. Only Fiscal Service can instruct the TCMM Operations Team to release collateral held under 31 CFR 202 for an insolvent depositary.

Contact Us

Detailed Contacts

Direct inquiries concerning this chapter to:

Department of the Treasury 
Bureau of the Fiscal Service 
Revenue Collections Management 
Bank Policy and Oversight Division

3201 Pennsy Drive, Building E 
Landover, MD 20785


202-874-8471 

 

Contact the TCMM Operations Team at:

TCMM Operations Team 
Federal Reserve Bank of St. Louis

1421 Dr. Martin Luther King Drive 
St. Louis, MO 63016-3716


888-568-7343, option 2 
866-707-6574

 

For information describing acceptable collateral and its valuation, see TreasuryDirect website.

For information on collateral policy, see Treasury Collateral Management and Monitoring website.

Protection Of Non-Public Personal Information

Introduction

This chapter applies to the maintenance and use of non-public personal information obtained by a Federal Reserve Bank (FRB) in its capacity as fiscal agent for the U.S. Department of the Treasury, Bureau of the Fiscal Service (Fiscal Service).

Section 6010—Authority

Title 12 of the United States Code (U.S.C.), Section 391, authorizes the Secretary of the Treasury to use FRBs as depositaries and fiscal agents of the United States. The Secretary of the Treasury may prescribe reasonable duties to be performed by FRBs in connection with their fiscal agency responsibilities.

Section 6015—Background and Concepts

When acting in the role of fiscal agent, an FRB may be required to design, develop, operate, or maintain a system of records on individuals to accomplish an Fiscal Service required function in compliance with the Privacy Act of 1974 (5 U.S.C. § 552a) and applicable Treasury Department regulations. The term "system of records" means a group of any records under the control of any Federal agency from which information is retrieved by the name of the individual or by some identifying number, symbol, or other identifying particular assigned to the individual.

Section 6020—Protection of Non-Public Personal Information

As fiscal agents for the Bureau of the Fiscal Service, the FRBs shall protect the security and confidentiality of non-public personal information (including any information contained in a system of records) obtained by them in their fiscal agency role against any anticipated threats or hazards to the security or integrity of such information, and against unauthorized access to or use or reuse of such information for any purposes other than as authorized by Fiscal Service. Non-public personal information includes, but is not limited to, such information as payee names and Social Security numbers that would appear on Treasury checks processed by FRBs. FRBs shall inform their employees, contractors, and agents to whom non-public personal information is or may be disclosed of their responsibilities in complying with this provision.

Contact Us

Contact Details

Direct inquiries concerning this chapter to:

Department of the Treasury 
Bureau of the Fiscal Service 
FRB Liaison and Program Manager

3201 Pennsy Drive, Building E 
Landover, MD 20785


202-874-7006 
202-874-6743

 

For security related issues, contact the Fiscal Service IT Service Desk at 304-480-7777.