[CSMFO Members] Collateralization of CD's

[MaryJo Walker]

Thanks to all who replied so far re: collateralization of CD's.  I heard from Kay Chandler of Chandler Liquid Assets Management, Larry Ronnow from Upland, Kurt Hahn, Geoff Bunton from Vacaville, Anita Lawrence from Camarillo, and Therese Balbo from Sunnyvale.  The answer is pretty clear.  I will quote Kay Chandler because, as usual for Kay, I couldn't say it better:

"The Code requires that non-negotiable time deposits be collateralized with 110% of certain government securities, then has some additional provisions for certain mortgage collateral.

The Code ( 53635i) requires 102% collateral for repurchase agreements.

The code also permits local agencies to buy negotiable certificates of deposit (53635h)  that are not collateralized at all.  These are issued by large banks and can be bought and sold in the "secondary" market, which means after they are originally issued."

The 102% apparently came into the picture because repos are collateralized at 102%, but a number of cities I looked at are using it as the collateralization % for CD as well, which is incorrect.

Thank you everyone.

Mary Jo Walker
City of Saratoga