Bank Information Terms and Conditions

BANK QUALIFICATION

All Banks participating in the Linked Deposit program must be qualified through the Public Deposit Protection Commission (PDPC).  The PDPC provides for a collateral pool for protection of balances deposited with qualified Washington public depositories.  For further information on this program, contact Nancy Adams, PDPC Administrator at 360-902-9077 or nancy@tre.wa.gov. 

VERIFICATION OF BUSINESS QUALIFICATION

Financial institutions must verify that a business is certified by the Office of Minority and Women's Business Enterprises (OMWBE) and certify to The Office of the State Treasurer (OST) that the 2%  rate reduction on a Linked-Deposit Program loan is passed along to the borrower that the CD investment was intended to fund.  A loan enrollment form (see Program Documents on website) must be filled out and returned to OMWBE for verification two (2) weeks prior to disbursement of funds for every loan. OMWBE will send back a Certification Verification form for each loan submitted with an estimated time for disbursement.

CD TERMS AND MATURITIES

OST funding for the linked deposit program will be made monthly depending upon the availability of funds.

The term of the CDs will be the same as the term of the “linked” loans; but no longer then ten years.  The interest rate and the principal amount of the CD will be adjusted monthly to reflect the changes in the principal on the “linked” loans during the preceding month.  CDs will mature on the 15th of each month.  If the 15th is a weekend or a bank holiday, the CD will mature on the first bank working day after the 15th.

The dollar amount of the Linked-Deposit CD will correspond to the value of the qualifying loans outstanding monthly.  One (1) Certificate of Deposit (CD) per bank will be issued which will be equal to the sum of the outstanding principal balances of all Linked Loans done by that bank.  For example, a bank may have done six different linked loans, with an original principal amount of $600,000.00, that currently have an outstanding principal amount of $435,090.45.  The amount of the CD for the current month would be $435,090.45.

CD INTEREST RATE DETERMINATION AND CALCULATION

The monthly rate will be based on the bond equivalent yield of the old 2-year Note that now has one year to maturity.  The formula will be the ask yield of the one-year Note, plus 50 basis points, LESS the 200 basis point differential designated in statute.  The source for the yield of the one-year Note will be from the Bloomberg system as of the rate setting date.  A list of the specific issues and effective dates that will be used in setting the rates will be provided by OST (see below). Interest will be calculated on an actual/360 day basis (non compounding) and paid monthly to OST.  No CDs will be issued with an interest rate of less than 0% percent.  (If at such time the interest rate would have fallen below 2%, the Banks may adjust the reduced rate on loans to reflect the difference) but until that time all loans should carry the full 2% reduction.

This is according to EHB 1167.

CD PRINCIPAL AMOUNT DETERMINATION

The new principal amount of a CD on the monthly rollover day will be the principal maturing, LESS any principal paid by borrowers on  “linked” loans during the preceding month, PLUS the principal amount of any new “linked” loans. 

OFFICIAL NOTIFICATION

Each participating financial institution will have one main contact branch.  This contact will provide the monthly certification form.  This form must be received by the OST by the stated time and date on the form or two working days prior to a CD rollover date.  The principal amount of the CDs changes as the corresponding loan amounts change, and OST has no way of knowing the amount of loans outstanding on the rollover date, unless notified by bank contact.  If official notification is not made, OST reserves the right to assume that all loans have been paid in full, to close the CD, and return all money to OST.

EXCHANGE OF FUNDS

All exchange of funds will be done through the Automated Clearing House ( AC H) and will be initiated by OST.  All financial institutions will need to complete and return the AC H information sheet (Appendix D) (see Program Documents on website)two weeks prior to the initial exchange of funds or if there are any changes in account information during the program. There will be one account set up per financial institution; this account is to be used for all loans for all branches of the financial institution.

RETURN OF FUNDS TO STATE TREASURER

OST may redeem all Certificates of Deposit for the following reasons:

• Failure to supply OST with the monthly information form in a timely manner
• De-certification of business by OMWBE
• Default of loan
• Unqualified bank - failure to report and collateralize with PDPC
• Determination is made that loans were not given the 2 percent rate reduction

No loans shall be funded to any employees of the Office of the State Treasurer.

RATES

Effective Dates 2009

 *The formula will be the “ask yield” of the old two-year Note with one year left of maturity, plus 50 basis points, LESS the 200 basis point differential designated in statute.