Oregon Credit Unions Can Now Accept Large Deposits, Expanding the Public Funds Options for Local Governments

New collateral protection allows credit unions to join banks and become qualified public depositories

SALEM – Beginning April 1, 2013, qualified credit unions can accept and safely hold large public funds deposits in Oregon.

The new Oregon Credit Union Public Funds Collateralization Program allows credit unions, for the first time in Oregon history, to accept public funds deposits that exceed federal insurance limits. Until now, only qualified banks could accept substantial public deposits beyond the limit, now $250,000 per depositor.

The change means Oregon government entities will have additional options for deciding where to keep their funds, while still being assured those public deposits are protected in the event of a bank or credit union failure.

The cities of Portland, Beaverton, Corvallis, Independence and Klamath Falls have signed letters pledging to deposit funds in excess of $250,000 in one or more of the participating credit unions. At least five credit unions are expected to hold public funds above that insurance threshold.

The State Treasury administers the Public Funds Collateralization Program for banks, and will also oversee the parallel program for credit unions. Participating institutions protect deposits above the insured threshold by posting securities as collateral against uninsured public funds balances. In the event of a loss, the state can recover public funds by selling this collateral.

Bank deposits of as much as $250,000 are already insured by the Federal Deposit Insurance Corp., and credit union deposits to that same level are insured by the National Credit Union Administration.

“The state Treasury helps to keep Oregon’s money safe by protecting public funds that are deposited in private institutions,” said State Treasurer Ted Wheeler. “I am pleased that credit unions have worked with Treasury to create the necessary safeguards, which allow them to also keep government deposits.”

The ten initial participating credit unions are Unitus, Pacific Crest, OSU Federal Credit Union, OnPoint, Advantis, MAPS Credit Union, Northwest Community, Old West, Wauna Federal Credit Union, and Oregon Community.

The amount of required collateral from each credit union will depend on their uninsured public funds balance, which must be reported to the State Treasury either weekly or monthly. The minimum collateral requirement can range from 10 to 110 percent of uninsured public funds deposits, depending on the capitalization level of the individual credit union and the number of participating credit unions in the program.

Legislation passed in 2010 and clarified in 2011 authorized the State Treasury to establish a collateralization program to protect public deposits at credit unions, after certain criteria were met including pledges from governments to make deposits.

As of December 31, there were 37 banks qualified as public fund depositories in Oregon and 27 of those held public funds, which totaled about $1.6 billion. The funds are deposited by the gamut of governments, from state agencies to school districts to cities to water districts.

The Oregon State Treasury protects public assets and saves Oregonians money through its investment, banking, and debt management functions. State investment policies are overseen by the Oregon Investment Council. The State Treasury also promotes public outreach and education to help Oregonians learn strategies to save money, invest for college and make smart financial choices. You can track Treasury-related news on Twitter at @OregonTreasury.