N.J. Stat. tit. 17, ch. 9

in effect

N.J. Stat. § 17:9-9 Depositories for public moneys; designation; effect upon officers liability

Any administrative board, commission, department, public official, sinking fund commission, district or other public agency of the state or of any political subdivision thereof, charged with the custody or control of moneys, except such agencies as to which provision has otherwise, by law, been made with respect to the designation of depositories, shall designate a depository or depositories in this state wherein all such moneys shall be kept. The designation shall be by resolution, and thereafter any official charged with the custody of such moneys shall cause them to be kept and deposited only in the depository or depositories so named, and upon so depositing in good faith such moneys any such official shall be relieved of liability from any loss of such funds or moneys which may be due to the insolvency or closing of the depository or depositories.

N.J. Stat. § 17:9-41 Definitions.

1. In this act, unless the context otherwise requires: "Adequately capitalized" means, with respect to a public depository, "adequately capitalized" as the term is defined in subsection (b) of section 38 of the "Federal Deposit Insurance Act," Pub.L.81-797 (12 U.S.C. s.1831o(b)), or subsection (c) of section 216 of title II of the "Federal Credit Union Act," Pub.L.73-467 (12 U.S.C. s.1790d(c)), as applicable, and their implementing regulations; "Association" means any State or federally chartered savings and loan association; "Capital funds" means (a) in the case of a State bank or national bank or capital stock savings bank, the aggregate of the capital stock, surplus and undivided profits of the bank or savings bank; (b) in the case of a mutual savings bank, the aggregate of the capital deposits, if any, and the surplus of the savings bank; (c) in the case of an association, the aggregate of all reserves required by any law or regulation, and the undivided profits, if any, of the association; and (d) in the case of a credit union, the aggregate of all reserves required by any law or regulation, and the capital deposits of the credit union; "Commissioner" means the Commissioner of Banking and Insurance; "Credit union" means a credit union as defined by section 2 of P.L.1984, c.171 (C.17:13-80); "Critically undercapitalized" means, with respect to a public depository, "critically undercapitalized" as the term is defined in subsection (b) of section 38 of the "Federal Deposit Insurance Act," Pub.L.81-797 (12 U.S.C. s.1831o(b)), or subsection (c) of section 216 of title II of the "Federal Credit Union Act," Pub.L.73-467 (12 U.S.C. s.1790d(c)), as applicable, and their implementing regulations; "Defaulting depository" means a public depository as to which an event of default has occurred; "Eligible collateral" means: (a) Obligations of any of the following: (1) The United States; (2) Any agency or instrumentality of the United States, including, but not limited to, the Student Loan Marketing Association, the Government National Mortgage Association, the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, the Federal Housing Administration and the Small Business Administration; (3) The State of New Jersey or any of its political subdivisions; (4) Any other governmental unit; or (b) Obligations guaranteed or insured by any of the following, to the extent of that insurance or guaranty: (1) The United States; (2) Any agency or instrumentality of the United States, including, but not limited to, the Student Loan Marketing Association, the Government National Mortgage Association, the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, the Federal Housing Administration and the Small Business Administration; (3) The State of New Jersey or any of its political subdivisions; or (c) Obligations now or hereafter authorized by law as security for public deposits; (d) Obligations in which the State, political subdivisions of the State, their officers, boards, commissions, departments and agencies may invest pursuant to an express authorization under any law authorizing the issuance of those obligations; (e) Obligations, letters of credit, or other securities or evidence of indebtedness constituting the direct and general obligation of a federal home loan bank or federal reserve bank; or (f) Any other obligations as may be approved by the commissioner by regulation or by specific approval; "Event of default" means issuance of an order of a supervisory authority or of a receiver restraining a public depository from making payments of deposit liabilities; "Governmental unit" means any county, municipality, school district or any public body corporate and politic created or established under any law of this State by or on behalf of any one or more counties or municipalities, or any board, commission, department or agency of any of the foregoing having custody of funds or any charitable funds established pursuant to section 2 of P.L.2018, c.11 (C.54:4-66.7), or spillover funds established pursuant to subsection e. of section 2 of P.L.2018, c.11 (C.54:4-66.7); "Maximum liability" of a public depository means, with respect to any event of default, a sum equal to 4% of the average daily balance of collected public funds held on deposit by the depository during the three-month period ending on the last day of the month immediately preceding the occurrence of the event of default that exceed the amount of such public fund deposits that are insured by the Federal Deposit Insurance Corporation, the National Credit Union Share Insurance Fund, or by any other agency of the United States which insures deposits made in public depositories; "Net deposit liability" means the deposit liability of a defaulting depository to a governmental unit after deduction of any deposit insurance with respect thereto; "Obligations" means any bonds, notes, capital notes, bond anticipation notes, tax anticipation notes, temporary notes, loan bonds, mortgage related securities, or mortgages; "Public depository" means a State or federally chartered bank, savings bank, credit union, or an association located in this State or a state or federally chartered bank, savings bank, credit union, or an association located in another state with a branch office in this State, the deposits of which are insured by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund and which receives or holds public funds on deposit; "Public funds" means the funds of any governmental unit, including but not limited to moneys possessed or held by charitable funds established pursuant to section 2 of P.L.2018, c.11 (C.54:4-66.7), spillover funds established pursuant to subsection e. of section 2 of P.L.2018, c.11 (C.54:4-66.7), or local charitable donations as defined in section 1 of P.L.2018, c.11 (C.54:4-66.6) or in escrow related thereto, but does not include deposits held by the State of New Jersey Cash Management Fund; "Significantly undercapitalized" means, with respect to a public depository, "significantly undercapitalized" as the term is defined in subsection (b) of section 38 of the "Federal Deposit Insurance Act," Pub.L.81-797 (12 U.S.C. s.1831o(b)), or subsection (c) of section 216 of title II of the "Federal Credit Union Act," Pub.L.73-467 (12 U.S.C. s.1790d(c)), as applicable, and their implementing regulations; "Undercapitalized" means, with respect to a public depository, "undercapitalized" as the term is defined in subsection (b) of section 38 of the "Federal Deposit Insurance Act," Pub.L.81-797 (12 U.S.C. s.1831o(b)), or subsection (c) of section 216 of title II of the "Federal Credit Union Act," Pub.L.73-467 (12 U.S.C. s.1790d(c)), as applicable, and their implementing regulations; "Valuation date" means March 31, June 30, September 30, and December 31; "Well capitalized" means, with respect to a public depository, "well capitalized" as the term is defined in subsection (b) of section 38 of the "Federal Deposit Insurance Act," Pub.L.81-797 (12 U.S.C. s.1831o(b)), or subsection (c) of section 216 of title II of the "Federal Credit Union Act," Pub.L.73-467 (12 U.S.C. s.1790d(c)), as applicable, and their implementing regulations. L.1970, c.236, s.1; amended 1973, c.98, s.1; 1977, c.281, s.5; 1982, c.169; 1986, c.161; 1996, c.17, s.1; 2003, c.178; 2009, c.326, s.1; 2011, c.108, s.1; 2018, c.11, s.9.

N.J. Stat. § 17:9-42 Security requirement for public depositories.

2. The receipt and holding of public funds on deposit by a public depository is a voluntary activity undertaken by that depository. However, no governmental unit shall deposit public funds in a public depository unless such funds are secured by the depository, and the depository is otherwise in compliance, or acting in accordance with, this act. L.1970, c.236, s.2; amended 2009, c.326, s.2.

N.J. Stat. § 17:9-43 Powers of commissioner.

3. The commissioner shall have power: a. To require any public depository to furnish financial information on a quarterly basis, due on the same day as the due date for filing a call report on a depository's overall condition under federal or state law with the appropriate federal banking agency or state bank supervisor, as defined by subsections (q) and (r) of section 3 of the "Federal Deposit Insurance Act," Pub.L.81-797 (12 U.S.C. s.1813(q) and (r)); however, the commissioner shall prescribe filing dates on a quarterly basis, if the applicable federal or state law reporting requirements no longer require the filing of a call report on a quarterly basis. This information shall be furnished on a form and in a format as the commissioner shall prescribe by regulation. The information shall include, but not be limited to, public funds on deposit, eligible collateral pledged as security for public funds on deposit, measurements of capital adequacy or ratios, and liquidity, as well as such other information as the commissioner shall request. Any public depository which refuses or neglects to give any information so requested may be excluded by the commissioner from the right to receive public funds for deposit until such time as the commissioner shall acknowledge that such depository has furnished the information requested; b. To take such action as the commissioner deems best for the protection, collection, compromise, or settlement of any claim arising in case of an event of default; c. To fix the date on which an event of default shall be deemed to have occurred, taking into consideration the orders, rules and regulations of any supervisory authority as they affect the failure or inability of a public depository to repay public funds held on deposit; d. Upon the happening of an event of default, to take possession of and liquidate the collateral of the defaulting depository maintained pursuant to section 4 of this act; e. To do all acts required to carry out the purposes of this act and, to that end, to make, amend and repeal regulations consistent with this act; f. To engage the services of one or more consultants, advisors, or other experts deemed necessary by the commissioner to assist in carrying out the administration and enforcement of the "Governmental Unit Deposit Protection Act," P.L.1970, c.236 (C.17:9-41 et seq.); g. To require any public depository with public funds on deposit: (1) to authorize the release of its most recent examination report, prepared by the depository's appropriate federal banking agency or state bank supervisor, as defined by subsections (q) and (r) of section 3 of the "Federal Deposit Insurance Act," Pub.L.81-797 (12 U.S.C. s.1813(q) and (r)), to the commissioner, or otherwise furnish a certified copy thereof; or (2) if the report or copy thereof described in paragraph (1) of this subsection is not available, to submit (a) an annual certification from the depository's outside auditor, stating that the depository is in compliance with the requirements of the "Governmental Unit Deposit Protection Act," P.L.1970, c.236 (C.17:9-41 et seq.), including all collateral requirements, or (b) any other annual statement already required by federal or state law, deemed acceptable by the commissioner, stating the depository's compliance as required by this paragraph; h. To designate any information obtained by, or disclosed to, the commissioner under the "Governmental Unit Deposit Protection Act," P.L.1970, c.236 (C.17:9-41 et seq.), as confidential and not a public record subject to public inspection, examination, or copying under the provisions of P.L.1963, c.73 (C.47:1A-1 et seq.); i. To require any public depository, other than a public depository paying assessments pursuant to section 3 of P.L.2005, c.199 (C.17:1C-35), to pay to the commissioner, through electronic means, an annual fee to be dedicated to the operations of the department in connection with the administration and enforcement of the "Governmental Unit Deposit Protection Act," P.L.1970, c.236 (C.17:9-41 et seq.). This fee shall be prescribed by the commissioner by regulation and based on the amount of public funds on deposit in the public depository, but shall not exceed $500 for any public depository with only public funds on deposit that are insured by the Federal Deposit Insurance Corporation or by any other agency of the United States which insures deposits made in public depositories, or $6,000 for any public depository with $1,000,000,000 or more in public funds on deposit. L.1970, c.236, s.3; amended 1988, c.73, s.4; 2009, c.326, s.5.

N.J. Stat. § 17:9-43.1 Eligible collateral requirement for certain public funds.

3. a. (1) Except as set forth in subsection b. of this section concerning extraordinary amounts of public funds on deposit, every public depository having public funds on deposit therein that are not insured by the Federal Deposit Insurance Corporation or by any other agency of the United States which insures deposits made in public depositories, shall maintain, as security for such deposits, eligible collateral having a market value: (a) At least equal to 5% of the uninsured public funds on deposit, if the public depository is well capitalized; (b) At least equal to 30% of the uninsured public funds on deposit, if the public depository is adequately capitalized; (c) At least equal to 60% of the uninsured public funds on deposit, if the public depository is undercapitalized; (d) At least equal to 90% of the uninsured public funds on deposit, if the public depository is significantly undercapitalized, or, in the alternative and at the election of the depository, a reduction in the amount of public funds held on deposit, so that the only remaining public funds on deposit after this reduction are insured by the Federal Deposit Insurance Corporation or by any other agency of the United States which insures deposits made in public depositories; or (e) At least equal to 120% of the uninsured public funds on deposit, if the public depository is critically undercapitalized, or, in the alternative and at the election of the depository, a reduction in the amount of public funds held on deposit, so that the only remaining public funds on deposit after this reduction are insured by the Federal Deposit Insurance Corporation or by any other agency of the United States which insures deposits made in public depositories. (2) The amount of eligible collateral in relation to the amount of public funds on deposit necessary for a public depository to meet the collateral requirements of paragraph (1) of this subsection shall be measured as: (a) the percentage, set forth under paragraph (1) of this subsection, of the average daily balance of collected, uninsured public funds on deposit during the three-month period ending on the immediately preceding valuation date; or (b), at the election of the depository, the percentage, set forth under paragraph (1) of this subsection, of the average balance of collected, uninsured public funds on deposit on the first, eighth, fifteenth and twenty-second days of each month in the three-month period ending on the immediately preceding valuation date. b. (1) Every public depository having public funds on deposit therein in excess of $200,000,000 that are not insured by the Federal Deposit Insurance Corporation or by any other agency of the United States which insures deposits made in public depositories shall maintain, as security for such excess, uninsured deposits, eligible collateral having a market value at least equal to 100% of the average daily balance of those collected, uninsured public funds on deposit during the three-month period ending on the immediately preceding valuation date, or, at the election of the depository, at least equal to 100% of the average balance of those collected, uninsured public funds on deposit on the first, eighth, fifteenth and twenty-second days of each month in the three-month period ending on the immediately preceding valuation date. (2) A public depository shall not at any time receive and hold on deposit for any period in excess of 15 days public funds of a governmental unit or governmental units which, in the aggregate, exceed 75% of the capital funds of the depository, unless such depository shall, in addition to the security required to be maintained under this section, secure such excess by eligible collateral with a market value at least equal to 100% of such excess. L.2009, c.326, s.3.

N.J. Stat. § 17:9-43.2 Designation of nonprofit organization as recipient of funds.

5. a. Within six months of the effective date of this section, the Department of Education, in consultation with the Department of Banking and Insurance, shall designate a nonprofit corporation, organized under the "New Jersey Nonprofit Corporation Act," N.J.S.15A:1-1 et seq., and with a history and experience in promoting financial education and financial literacy and delivering financial education and financial literacy services, to serve as the recipient of the funds due from credit unions pursuant to subsection b. of this section. The designation by the department: (1) shall include any requirements determined by the Department of Education to be necessary to insure proper oversight of the expenditure of the funds by the nonprofit corporation for financial education and financial literacy purposes; and (2) may include a requirement that the nonprofit corporation provide funding for the high school pilot program in personal financial literacy established pursuant to section 1 of P.L.2009, c.153 (C.18A:6-115) or any expansion of that program. b. (1) The chief financial officer of a credit union that qualifies as a public depository pursuant to P.L.1970, c.236 (C.17:9-41 et seq.) shall transmit to the Department of Banking and Insurance with each fourth quarter report required annually pursuant to section 3 of P.L.1970, c.326 (C.17:9-43) a written certification that the credit union has forwarded to the nonprofit corporation designated pursuant to subsection a. of this section a sum equal to the average daily balance, if the average daily balance is in excess of $2 million, for the preceding year of the public funds on deposit at the credit union, multiplied by the appropriate factor, as determined in accordance with the following schedule: (a) an average daily balance in excess of $2 million but less than $25 million: multiply by a factor of .0005. (b) an average daily balance of $25 million or over but less than $50 million: multiply by a factor of .00075. (c) an average daily balance of $50 million or over: multiply by a factor of .0010. However, in no event, shall a credit union be required to forward a sum in excess of $100,000 in any one year. (2) The certification shall comply with any requirements determined by the department to be necessary for the calculation and transmission of such funds. c. The Department of Education may adopt, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) any rules and regulations necessary to implement the provisions of subsection a. of this section. The Department of Banking and Insurance may adopt, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) any rules and regulations necessary to implement the provisions of subsection b. of this section. L.2011, c.108, s.5.

N.J. Stat. § 17:9-44 Amount of collateral required as security; exceptions.

4. a. (1) No public depository, notwithstanding the collateral requirements set forth under section 3 of P.L.2009, c.326 (C.17:9-43.1), shall be required to maintain any eligible collateral pursuant to this act as security for any deposit or deposits of any governmental unit to the extent that such deposit or deposits are insured by the Federal Deposit Insurance Corporation, the National Credit Union Share Insurance Fund, or by any other agency of the United States which insures deposits made in public depositories. (2) In the case of any public depository which has not held public funds on deposit for all of a three-month period as measured pursuant to the provisions of section 3 of P.L.2009, c.326 (C.17:9-43.1), the commissioner shall, notwithstanding the provisions of that section, prescribe the amount of eligible collateral required to be maintained. (3) Depositories shall have the right to make substitutions of eligible collateral at any time. The income from eligible collateral shall belong to the public depository without restriction. b. (Deleted by amendment, P.L.2009, c.326) c. All collateral required to be maintained shall be deposited with any Federal Reserve Bank or Federal Home Loan Bank, or any other banking institution located in this State or a contiguous state as authorized by regulation of the commissioner, and which has capital funds of not less than $25,000,000.00. Notwithstanding the foregoing, the commissioner may authorize public depositories to hold and maintain the required collateral in such a manner as he deems consistent with the purposes of this act. d. The market value of eligible collateral maintained pursuant to this section on any valuation date shall be presumed to be the market value of such collateral continuing until the next succeeding valuation date. L.1970, c.236, s.4; amended 1973, c.98, s.2; 2009, c.326, s.4; 2011, c.108, s.2.

N.J. Stat. § 17:9-45 Proceedings after determination of default; pro rata distribution of collateral; assessment of other public depositories for deficiency.

5. When the commissioner determines that an event of default has occurred, he shall proceed in the following manner: a. Within 20 days after the occurrence of the event of default, he shall ascertain the amount of public funds on deposit in the defaulting depository as disclosed by its records and the amount thereof covered by federal deposit insurance and certify the amounts thereof to each affected governmental unit; b. Within 10 days after receipt of such certification, each such governmental unit shall furnish to the commissioner verified statements of its public deposits in such defaulting depository as disclosed by its records; c. Upon receipt of such certificate and statements, he shall ascertain and fix the amount of such public funds on deposit in such defaulting depository, net after deduction of any deposit insurance; d. He shall ascertain the amount derived or to be derived from the liquidation of the collateral maintained by the defaulting depository pursuant to section 4 of this act, and shall distribute such proceeds pro rata among the governmental units affected to the extent necessary to satisfy the net deposit liabilities to such governmental units; e. If the proceeds of the sale of the collateral of a defaulting depository which is a State bank, a national bank, a savings bank, or a credit union are insufficient to pay in full the net deposit liability of such depository to all affected governmental units, he shall assess the deficiency against all other such public depositories having public funds on deposit as of the occurrence of the event of default in the proportion that the maximum liability of each such other public depository bears to the aggregate of the maximum liabilities of all such other depositories, but no such assessment shall exceed the maximum liability of any such other depository; f. If the proceeds of the sale of the collateral of a defaulting depository which is an association are insufficient to pay in full the net deposit liability of such depository to all affected governmental units, he shall assess the deficiency against all such other public depositories having public funds on deposit as of the occurrence of the event of default in the proportion that the maximum liability of each such other public depository bears to the aggregate of the maximum liabilities of all such other depositories, but no such assessment shall exceed the maximum liability of any such other depository; g. Assessments so made by the commissioner shall be payable on the fifth day following the demand therefor by the commissioner. On default of such payment by any such other public depository, the commissioner shall take possession of and liquidate so much of the eligible collateral maintained by such depository as shall be necessary to satisfy the assessment so made. If the proceeds of the liquidation of the eligible security are insufficient to pay such assessment in full, the commissioner may sue to recover the amount of the deficiency within the limits of the depository's maximum liability. h. All sums so collected by the commissioner shall be paid by him to the governmental units having deposits in the defaulting depository in the proportion that the net deposit liability to each such governmental unit bears to the aggregate of the net deposit liabilities to all such governmental units; i. No State bank, national bank, savings bank, or credit union shall be liable with respect to the occurrence of an event of default of an association, and no association shall be liable with respect to the occurrence of an event of default of a State bank, a national bank, a savings bank, or a credit union. L.1970, c.236, s.5; amended 2011, c.108, s.3.

N.J. Stat. § 17:9-46 Distribution of proceeds of liquidation of defaulting depository

Upon payment to a governmental unit, the commissioner shall be subrogated to all of such governmental unit's right, title and interest against the defaulting depository. All sums received from any distribution of any liquidation of the defaulting depository shall be paid to the affected governmental units to the extent of any unpaid net deposit liability and the balance shall be paid to the public depositories against which assessments were made, in proportion to such assessments. If the commissioner incurs expense in enforcing any such claim, the amount thereof shall be paid as a liquidation expense of the defaulting depository. L.1970, c. 236, s. 6, eff. Oct. 27, 1970.

N.J. Stat. § 17:9-47 Operative date.

7. The provisions of this act shall become operative on December 1, 1970, but the commissioner may issue appropriate regulations in advance thereof. The provisions of P.L.2009, c.326 (C.17:9-43.1 et al.), amending and supplementing the "Governmental Unit Deposit Protection Act," P.L.1970, c.236 (C.17:9-41 et seq.), shall become operative on July 1, 2010, but the commissioner may issue appropriate regulations in advance thereof. L.1970, c.236, s.7; amended 2009, c.326, s.6.

N.J. Stat. § 17:9-48 Short title

This act shall be known and may be cited as the "Governmental Unit Deposit Protection Act." L.1970, c. 236, s. 8, eff. Oct. 27, 1970.

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