6.2-890 - (Effective October 1, 2010) Preferences by pledging assets.
§ 6.2-890. (Effective October 1, 2010) Preferences by pledging assets.
A. No bank shall give preference to any depositor or creditor by pledging theassets of such bank, except as otherwise authorized by subsection B, orexcept to secure deposits of trust funds made pursuant to the provisions of §6.2-1005 or 6.2-1057.
B. Notwithstanding the provisions of subsection A, any bank:
1. May deposit securities for the purpose of securing deposits of:
a. The United States government and its agencies;
b. The Commonwealth, its agencies, and its political subdivisions;
c. Insolvent national bank funds as permitted under 12 U.S.C. § 192;
d. Proceeds of sale of United States obligations as permitted under 31 U.S.C.§ 771; and
e. Bankruptcy funds deposited under the provisions of 11 U.S.C. § 15345;
2. May deposit securities for the purpose of securing sureties on suretybonds furnished to secure deposits listed in subdivision 1, or may, in lieuof depositing such securities to secure deposits of political subdivisions ofthe Commonwealth, by its board of directors, adopt a resolution before suchpublic funds are deposited therein, to the effect that, in the event of theinsolvency or failure of such bank, such public funds thereafter depositedtherein shall, in the distribution of the assets of such bank, be paid infull before any other depositors shall be paid deposits thereafter madetherein. The adoption of such resolution shall be deemed to constitute anobligation binding on such bank;
3. Is authorized to pledge its assets as security for amounts of borrowedmoney which shall not, without the approval of the Commission given inadvance in writing, exceed in the aggregate the amount of the capital,surplus, and undivided profits of such bank actually paid in or earned andremaining undiminished by losses or otherwise. The amount of assets pledgedfor the security of such a loan shall not, without such approval, exceed 150percent of the amount borrowed. No loan in excess of the amount so permittedmade to any such bank shall be invalid or illegal as to the lender, eventhough made without the consent of the Commission. Rediscounting with orwithout guarantee or endorsement of notes, drafts, bills of exchange, orloans is hereby authorized and shall not be limited by the terms of thissection, and shall not be considered as borrowed money within the meaning ofthis section;
4. Is authorized to borrow from a Federal Reserve Bank or a Federal Home LoanBank and to rediscount with and sell to a Federal Reserve Bank or a FederalHome Loan Bank any and all notes, drafts, bills of exchange, acceptances, andother securities, and to give security for all money so borrowed and for allliabilities incurred by the discount of such notes, drafts, bills of exchangeand other securities without restriction in like manner and to the sameextent as national banks may lawfully do under the acts of Congress andregulations of the Board of Governors of the Federal Reserve System and theFederal Housing Finance Board; and
5. Is authorized to pledge its assets in connection with qualified financialcontracts, which transactions shall be governed by this subdivision and notsubdivision 3. The amount of assets pledged for obligations under suchcontracts shall not exceed 150 percent of the amount of the obligations,without the consent of the Commission, and the qualified financial contractshall be in writing and approved by the board of directors of such bank or anappropriate committee, which approval shall be reflected in the minutes ofsuch board or committee. At the time any qualified financial contractsconsisting of retail repurchase agreements are sold by a state bank, themarket value of the underlying security must be at least equal to the amountof the aggregate purchase price paid by the purchasers of the retailrepurchase agreements. As used in this subdivision, "qualified financialcontract" means a qualified financial contract as defined in 12 U.S.C. §1821(e) (8) (D) (i), as the same may be amended, and any contract ortransaction that the Commissioner determines to be a qualified financialcontract for purposes of this section.
(Code 1950, §§ 6-64, 6-65, 6-66; 1966, c. 584, §§ 6.1-78, 6.1-79, 6.1-80;1974, c. 665; 1982, c. 112; 1994, c. 7; 2010, c. 794.)