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Frequently Asked Questions by Public
Entities
Implementation:
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Q: |
Is it mandatory for every bank in the state to be in
the SAFE Program?
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A: |
Yes. Should a bank want to hold or retain public
deposits in Alabama, it must be in the SAFE Program. |
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Q: |
How can I be assured that my public deposits are
coded correctly on the bank’s books? |
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A: |
Remember, your deposits were public deposits before
the SAFE Program and were being reported quarterly
on the bank’s FDIC call report. The SAFE Program
requires every Qualified Public Depository (QPD) to
administer internal and external audit reviews to
ensure that your accounts are adequately identified
as public deposits. In addition, you may further
verify this with your bank. |
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Q:
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How will I know if a bank is certified in the SAFE
Program? |
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A:
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Once a bank meets all the requirements to be
designated as a Qualified Public Depository (QPD), a
certificate stating such will be mailed to the QPD.
The bank should be willing to give you a copy of
this certification for your files. In addition, all
QPDs will be listed on the State Treasury’s website
address www.treasury.state.al.us and a listing
provided semi-annually to the Alabama Municipal
Journal and The County Commissioner for publication. |
Safety/Confirmation:
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Q: |
Will the SAFE Program confirm a public entities’
deposits to its auditors? |
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A: |
No. The deposit relationship is one between the
public entity and its bank. Each bank will report
one total of all public deposits held in that bank
to the SAFE Program monthly. |
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Q: |
What if a bank incorrectly reports its public
deposits?
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A: |
Banks report public deposits quarterly on their call
report filed with the FDIC. The SAFE Program will
receive a copy of this report to verify that the
amount reported on the call report coincides with
the amount reported to the SAFE Program. Reporting
incorrectly, misleading, or inaccurate information
is illegal and grounds for involuntary withdrawal or
suspension from the SAFE Program.
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Q: |
Are my public deposits covered completely regardless
of monthly balance fluctuations? |
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A: |
Yes. This is the most positive aspect of the SAFE
Program for a public entity. Regardless of your
deposit fluctuations or the market value of
collateral, you are assured that your deposits are
secured due to the SAFE Program. Every bank in the
SAFE Program stands behind your deposit.
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Q: |
If a public entity declares itself as a public
depositor to a QPD, the QPD fails and does not
include the public entity on its list of public
depositors, would the public depositor be covered by
the SAFE Program? |
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A: |
Yes. The SAFE Program provides that each bank
annually confirm deposit relationships with each
public depositor. The public depositor will verify
this report and maintain this report in its files.
In addition, the depositor will continue to receive
monthly statements and account records in the
ordinary course of business. These records may serve
as proof of the deposit relationship.
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Frequently Asked Question by Banks:
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Q: |
What collateral is considered acceptable? |
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A: |
The SAFE Law has been revised to expand the list of
collateral acceptable for pledging purposes.
This list is provided on the Treasurer's website
under the "Eligible Collateral Expanded for
SAFE Program" link. |
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Q:
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How do I know if the bonds or warrants of the state
of Alabama have a current average annual debt
service coverage of at least two times? |
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A: |
With the recent expansion of acceptable collateral,
banks participating in the SAFE Program now have an
option when pledging in-state state or municipal
revenue bonds. They can provide either
a certification of current average annual debt
service coverage of at least two times or
pledge revenue bonds with a current rating of
"A2" or better by Moody's or "A"
or better by S&P or Fitch.
The information for debt service coverage for a bond
is likely contained in the Official Statement of the
bond issue. After the initial issuance, that
information would be determined in your financial
analysis of the repayment source of the bond.
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Q: |
Are out-of-state city and county bonds acceptable? |
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A: |
Yes, with certain restrictions. Only General
Obligation bonds carrying the full faith and credit
of the city or county of any state of the U.S. with
a rating of "A2" or better by Moody's or
"A" or better by S&P are acceptable
for pledging purposes by the SAFE program. |
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Q: |
How is the independent financial evaluation
obtained? |
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A: |
Currently, the SAFE Program utilizes the peer group
rating for each bank and savings institution
obtained through a subscription from Highline Data.
The rating for each institution is the end result of
Highline Data's analysis of that institution's
information contained in their quarterly call or
thrift report submitted to federal regulators.
Highline Data performs the analysis with their
proprietary formulas and provides SAFE only with the
rating for each institution without any additional
explanation.
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Q:
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How is FDIC insurance calculated? |
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A:
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FDIC insurance is applicable in the same manner that
it has always been. Be careful when completing the
monthly report that you do not automatically provide
$100,000 insurance coverage to depositors that have
a balance under $100,000. |
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