SECTION 3.59. Deposit Agreement and Conditions

(a) Approved deposit agreement. A foreign bank and a depository must execute a deposit agreement approved by the banking commissioner before the foreign bank may deposit assets for purposes of Finance Code, §204.113, and this subchapter. In addition to any other terms and conditions that are not inconsistent with those listed in this section or imposed by the banking commissioner, the deposit agreement must include the terms and conditions set forth in subsections (b) through (m) of this section.

(b) Limitation on assets that may be deposited. Only assets eligible to be pledged under §3.58 of this title (relating to Eligible Assets and Conditions) may be deposited into the pledge account.

(c) Assets pledged to banking commissioner. The assets must be pledged to the banking commissioner for the benefit of the creditors and depositors of the Texas state branch's or agency's business in this State. The banking commissioner must be provided with, and is deemed to have, a security interest in the pledged assets.

(d) Assets held as special deposit. The depository must hold the assets deposited under the agreement as a special deposit free of any lien, charge, right of set-off, credit, or preference in connection with any claim of the depository against the foreign bank or the Texas state branch or agency. The depository may not accept any asset under the agreement that is not accompanied by documentation necessary to facilitate transfer of title.

(e) Depository to furnish receipt. The depository must furnish the foreign bank, upon the deposit of assets under the depository agreement, a receipt or statement as evidence of the deposit. The receipt or statement must identify the deposit as having been made pursuant to Finance Code, §204.113, and under the deposit agreement, and must state the amount of the deposit and, with respect to the deposit of securities, a description of each security deposited.

(f) Release of securities by depository. The depository must release deposited assets to the foreign bank upon written request:

(1) when accompanied by a certificate, as described in subsection (g) of this section, signed by a duly authorized officer of the foreign bank; or

(2) upon receipt of the banking commissioner's written order to release such part of the deposited assets under such conditions and terms as the order may specify.

(g) Model certificate. A duly authorized officer of the foreign bank must execute the following or a similar certificate before making a withdrawal under subsection (f)(1) of this section: It is hereby certified that the aggregate value of securities and/or funds remaining on deposit pursuant to the Deposit Agreement after this withdrawal or substitution amounts to $_________, valued at the lower of principal amount or market value, and that such amount is at least equal to the amount required to be deposited under Finance Code, §204.113, and 7 TAC §3.51 et seq. The amount required to be maintained on deposit, calculated in accordance with this subchapter, is $_____ as of this date.

(h) Depository to furnish monthly statement of all transactions. The depository must furnish to the foreign bank, at least once in each calendar month, a statement of all transactions in the pledge account since the closing date of the previous statement. The statement must include a listing of the securities and/or the amount of funds on deposit as of the closing date of the statement. The depository must simultaneously send a copy of the statement to the banking commissioner.

(i) Depository may pay interest. So long as the Texas state branch or agency continues business in the ordinary course, the depository may pay interest earned on the assets in the pledge account in accordance with such arrangements as may be made between the depository and the foreign bank.

(j) Responsibility of depository with respect to deposited securities. Except as provided in this subsection, a depository must hold securities deposited under the deposit agreement separate and apart from all other securities and must permit duly authorized representatives of the foreign bank or of the banking commissioner to examine and compare such securities. A depository may utilize a central depository, clearing corporation or book entry system to hold securities deposited under the deposit agreement, provided that the records of the central depository, clearing corporation or book entry system show that the depository holds the securities as principal or as agent or as custodian of its customers. The depository must maintain adequate records to demonstrate the disposition of any book entry deposits.

(k) Safeguarding of deposited securities. The depository must give the same degree of care to the safekeeping, handling and shipping of deposited securities that the depository would give to its own securities.

(l) Banking commissioner not to pay for services rendered. The banking commissioner is not required to pay for any of the services rendered or any expenses incurred by the depository or the foreign bank under or in connection with 7 TAC §§3.51-3.61 or the deposit agreement.

(m) Termination of deposit agreement by foreign bank or depository. The foreign bank or the depository may terminate the deposit agreement by giving the other party at least sixty days written notice of the termination, or such shorter notice as the banking commissioner may approve, provided that no termination by the foreign bank or the depository is effective until:

(1) the foreign bank has designated another depository;

(2) the foreign bank has provided the banking commissioner with the name and address of the successor depository;

(3) the foreign bank and the successor depository have executed a deposit agreement that conforms to this section and has been approved by the banking commissioner; and

(4) the depository has released to foreign bank all the deposited assets in accordance with written instructions from the foreign bank approved by the banking commissioner.

(n) Additional terms and conditions. The banking commissioner may at any time impose different or additional terms and conditions upon the deposit agreement as deemed necessary or desirable.

(o) Termination of the right to substitute or withdraw assets. Upon notice to the foreign bank and the depository, the banking commissioner may terminate or suspend the authority of the foreign bank under subsection (f)(1) of this section to substitute or withdraw deposited assets.

(p) Termination of deposit agreement by banking commissioner. Upon notice to the foreign bank and the depository, the banking commissioner may terminate the deposit agreement and order the depository to release the pledged assets on such terms as are specified in the order if the foreign bank or the depository fails to comply with any term of the deposit agreement required by this section or with any other terms and conditions imposed by the banking commissioner under subsection (n) of this section.

Source Note: The provisions of this §3.59 adopted to be effective November 12, 2003, 28 TexReg 9823; amended to be effective September 8, 2022, 47 TexReg 5328