Banking Interpretations

NYSBL 107-a

New York State Banking Department

To:         Senior Examiner Weisman

From:     Harry C. Goberdhan - Associate Counsel

Date:      February 28, 2007

Subject:  [---] (the "Trust Company") – Non-Public Funds.


May a Bank or Trust Company, consistent with Section 107-a of the Banking Law provide security on "non-public funds."


We are unable to determine whether the "Funds" in question may be secured under Section 107-a.


The Trust Company is in receipt of a request from two organizations that are affiliated with the State University of New York at Alfred, NY. Both organizations have indicated to the Trust Company that the New York State Controller's Office has requested that such organizations obtain security on their accounts.

As indicated in the Trust Company's request to the Department dated, December 8, 2006, they seem to have made a determination that the "funds" are "non-public funds."


According to Section 107-a of the Banking Law:

Whenever a political subdivision is required by any general or special law to obtain a pledge of assets or other security from a public depository for its public deposits and such political subdivision has entered into a written agreement with such public depository relating to such public deposits ..., the public depository shall comply with the provisions of such law at the time it accepts any public deposits from the political subdivision.

As required by the statute, if a general or special law requires that a political subdivision obtain security for its public deposits, then a public depository is required to provide such security. Therefore, as a threshold matter a determination has to be made (not by the Department) as to whether the "funds" in question are "public" or "non-public."

Based on the facts presented, the Trust Company has made a determination that the deposits in question are "non-public deposits," and, therefore, the provisions of Section 107-a of the Banking Law are not applicable.

However, if it is determined that the deposits are "public deposits" then in accordance with Section 107-a of the Banking Law, the Trust Company may be required to "pledge assets or other security."


Noted: _____