Municipal Deposit Legislation

Sen. John Kennedy (R), Macon, has agreed to sponsor CBA’s priority municipal deposit legislation.  The bill has been drafted by legislative counsel.  CBA’s Lori Godfrey and James-Bates-Brannan-Groover-LLP’s John Sillay worked exclusively with the Office of the State Treasurer to hear Treasurer Steve McCoy’s concerns with the legislation as drafted.  Discussions with the Treasurer resulted in several modifications to the draft language in an effort to mitigate any concerns.  In addition, Lori Godfrey and John Sillay had discussions with the Department of Banking & Finance to ensure that the language of the proposed legislation does not impose any undue risk to the safety and soundness of Georgia banks.  After both agencies reviewed the final draft of the bill, CBA was told that all of the risks had been mitigated.  Revised language was submitted to legislative counsel and we are currently waiting for finalization of the bill so a bill number can be assigned and the bill can eventually be introduced in the Senate.

The bill will allow community banks to compete with large, often out-of-state banks, for local municipal accounts and deposits.  Community banks, many in rural Georgia, would be able to accept local government’s funds, allowing these banks in turn to reinvest and loan monies back into their own communities and spur economic activity. Increased lending will spur business growth, jobs and boost statewide economic activity.  Georgia is the ONLY state that does not permit local governments to utilize deposit placement services as an alternative to collateralization of public deposits.  According to the FDIC, community banks make over 40% of all small business loans in the country.  By keeping municipal deposits local and with local community banks, banks will have a greater ability to make more residential, commercial, agricultural and consumer loans in Georgia communities.  This bill also helps community banks by greatly improving the bank’s liquidity position if this option is used instead of the direct pledging method.

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