Full text of Federal Reserve Bank of New York Circulars : Appendix A, Third-Party Custody Agreement for Treasury Tax and Loan Collateral

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March 2, 1993
To the Addressee:
Enclosed is a copy of Appendix A, revised effective March
16, 1993, to this Bank's Operating Circular No. 18. This
appendix contains changes in the terms of the agreement between
this Bank and custodians of collateral pledged under 31 CFR 202
and 203. The changes make explicit the restriction that only
custodians that hold the collateral on their own premises may
enter into the agreement contained in that Appendix; in cases
where the collateral is held elsewhere, a different agreement
with the Reserve Bank must be executed.
A letter of instructions regarding the re-execution of such
third-party custody agreements has been sent, with the new
appendix, to the institutions involved.
If you have any questions about this matter, please contact
Anthony Pietrangolare (Tel. No. 212-720-5394) or Donald Wenner
(Tel. No. 212-720-5278).




Circulars Division
FEDERAL RESERVE BANK OF NEW YORK

Federal Reserve Bank
of New York
F isc a l A g e n t o f th e U n ited S tates

Appendix A to
Operating Circular No. 18

Revised effective March 16, 1993

THIRD-PARTY CUSTODY AGREEMENT
FOR TREASURY TAX AND LOAN COLLATERAL
[Depository Institution’s Offer to Contract and Application
for Designation as a Third-Party Custodian of Collateral
Pledged Under 31 C.F.R. Parts 202 and 203]

To All Depository Institutions in
the Second Federal Reserve District:
T h is o p eratin g circu lar ap p en d ix (th e “A p p e n d ix ”) sets forth th e term s o f
the ag reem en t b e tw e e n a d e p o sito r y in stitu tio n (th e “C u sto d ia n ”) and th is B ank
regarding th e h o ld in g , as a gen t for th e B ank and any oth er F ederal R e se r v e B ank
in its c a p a c ity as F isc a l A g e n t o f th e U n ited S tates, o f se c u r itie s p le d g e d to su ch
R e se r v e B ank b y any o th er d e p o sito r y in stitu tio n (th e “P le d g o r ”) to secu re d e ­
p o sits o f p u b lic m o n ey un d er the p ro v isio n s o f Parts 2 0 2 and 2 0 3 o f T itle 3 1 ,
C o d e o f F ed eral R egu lation s. To su p p ort its ap p lication un d er th is A p p e n d ix ,
th e C u sto d ia n represen ts that it is in th e b u sin e ss o f p rovid in g se c u r itie s sa fe ­
k eep in g s e r v ic e s for o th er d e p o sito r y in stitu tio n s and h as d o n e s o for at lea st
o n e year. In order for a C u sto d ia n to be q u a lified and d e sig n a te d as a C u sto d ia n
by th is B an k , th e C u sto d ia n m u st e x e c u te and return to th is B ank a letter a g r e e ­
m en t in th e form sp e c ifie d in th e E x h ib it to th is A p p e n d ix .
T h is ap p lication is for u se o n ly b y C u sto d ia n s that h old co lla tera l in sa fe ­
k e e p in g on th eir p rem ises. W ith th e k n o w le d g e and p rior approval o f th e R e ­
se r v e B an k , and after e x e c u tin g sp e c ific a g reem en ts required b y th e R e se r v e
B ank for su ch ex ten d ed c u sto d y arrangem ents, C u sto d ia n s m ay p la c e se c u r itie s
in th e c u sto d y o f a d e p o sito r y w h ich is an S .E .C .- r e g iste r e d cle a r in g a g e n c y
app roved b y th e U n ited S tates D ep artm en t o f th e T reasury for su ch p u rp o ses,
for transfer to a R e se r v e B ank a c c o u n t w h ich h as b een esta b lish e d to r e c e iv e
p le d g e s o f se c u r itie s at su ch d ep ository, su b ject to term s and c o n d itio n s a c c e p t­
ab le to th e R e se r v e B ank.




Terms of Agreement
C u stod ian h ereb y a p p lies to th e F ed eral R e se r v e Bank o f N e w York to act
as a third party c u sto d ia n for th e B ank and any o th er F ederal R e se r v e B ank (an y
o f w h ich are h erein after referred to as th e “R e serv e B ank”). I f d e sig n a te d as
q u a lifie d to be a C u sto d ia n b y the R e se r v e B an k , and in c o n sid era tio n o f the
b e n e fits and p r iv ile g e s related to su ch d e sig n a tio n , th e C u stod ian p ro m ises,
w arrants and agrees:
1.

To hold in its cu stod y, as agen t o f the R eserv e B an k , th o s e e lig ib le s e c u ­
rities w h ich a P le d g o r m ay p le d g e as collateral to secu re d e p o sits o f p u b lic
m o n ey under th e p ro v isio n s o f 3 1 C .F .R . Parts 2 0 2 and 2 0 3 . (F ed eral R e ­
se r v e b ook -en try e lig ib le se c u r itie s

2.

may not be

h eld b y a c u sto d ia n .)

To h old th e se c u r itie s p le d g e d su b ject e x c lu s iv e ly to th e R e se r v e B a n k ’s
w ritten or p rop erly au th en ticated w ired in stru ctio n s for rele a se, d elivery,
su b stitu tio n , w ith d raw al or o th er d isp o sitio n . A ll in stru ctio n s sh all b e e x ­
e c u te d w ith o u t d elay up on r eceip t o f a w ritten or prop erly au th en ticated
w ired order from th e R e se r v e Bank to that e ffe c t. “W ired ” tra n sm issio n s
as referred to in th is d o cu m en t m ay b e sen t b y cab le, fa c s im ile , telegrap h ,
telep h on e or o th er ele c tr o n ic tra n sm issio n d e sig n a te d by th e R e se r v e B ank.

3.

To h old all co lla tera l in sa fe k e e p in g on th e C u sto d ia n ’s p rem ises.

4.

To support ev e r y p le d g e o f collateral by issu in g to th e R e se r v e B ank an
a d v ic e o f cu stod y, in c o n fo r m a n c e w ith th e follow in g:
(a )

ea ch a d v ic e o f c u sto d y issu e d shall b e d eliv ered to th e R e se r v e Bank
in acco rd a n ce w ith th e R e se r v e B a n k ’s d e liv e r y tim e sch ed u les;

(b )

each a d v ic e o f c u sto d y sh all b e issu e d o n ly after th e C u stod ian has
c o n fir m e d that it p o s s e s s e s th e se c u r itie s,
(i)

i.e.,

that th e se c u r itie s are

p resen t on th e C u sto d ia n ’s p rem ises, or ( ii) in th e p o s s e s s io n o f

a transfer a gen t for the p u rp ose o f re-registerin g th em in th e n am e
o f th e C u sto d ia n ’s n om in ee;
(c )

each a d v ic e o f c u sto d y issu e d shall in clu d e o n ly se c u r itie s w h ich are
n e g o tia b le or transferable. (F o r requirem ents regarding a ssig n m e n t o f
se c u r itie s,

(d )

see

31 C .F R . Part 2 0 2 . 6 ( d ) or 2 0 3 . 1 5 ( e ) ) ;

ea ch a d v ice o f c u sto d y issu e d sh all sp ecify , w ith o u t lim ita tio n , the
follow in g:
(i) the n am e o f th e Pledgor;
(ii) the n am e o f th e C u sto d ia n ’s n o m in e e i f any, in w h o s e n a m e the
p le d g e d se c u r itie s are registered;
(iii) a fu ll d e sc r ip tio n o f th e secu rity, in clu d in g th e n a m e o f th e is ­
suer, C U S IP num ber, m atu rity date, and rate o f interest;
(iv ) th e o r ig in a l fa c e v alu e o f th e secu rity, and th e rem ain in g b a la n ce




for d e c lin in g b a la n ce secu rities;

2

( v ) th e nam e o f th e R e serv e B ank p led gee;
(v i) th e p u rp ose o f th e p led g e,

i.e.,

w h eth er th e co lla tera l is b ein g

p le d g e d to th e T reasury un d er 3 1 C .E R . Part 2 0 2 or Part 2 0 3 .
Separate a d v ic e s o f c u sto d y sh ou ld be is su e d for collateral
p le d g e d un d er ea ch Part.
5.

T hat an a d v ic e o f c u sto d y regu larly issu e d w ith p rin ted , fa c s im ile , or o th ­
er n on-m anual sign atu re o f an au th o rized o ffic e r or an e lec tro n ic tran s­
m issio n o f the C u sto d ia n sh all have th e sa m e e ffe c t as i f issu e d and m a n ­
u a lly sig n e d by an au th o rized o ffic e r o f th e C u sto d ia n , p rovid ed th e R e­
se r v e Bank r e c e iv in g th e a d v ic e has r e c e iv e d prior w ritten n o tice, and ap ­
proved o f the C u sto d ia n ’s p roced u res in th is resp ect.

6.

T hat ea ch a d v ice o f c u sto d y issu e d to th e R eserv e B ank sh all be c o n c lu ­
siv e e v id e n c e o f th e facts stated in th e advice.

7.

T hat any (a ) in terest p aym en ts b y th e o b lig o r w ith resp ect to se c u r itie s
p le d g e d under th is cu sto d ia l arran gem en t, and (b ) p r o c e e d s o f th e re­
d em p tio n o f m aturing c o u p o n s sh all b e paid to the P led gor, u n le ss o th ­
e r w ise d irected b y th e R e se r v e B ank. P r o c e e d s r e c e iv e d w ith r e sp e c t to
p rin cip a l p aym en ts on d e c lin in g v a lu e se c u r itie s sh all b e paid to th e P led ­

Declining value securities
are eligible only as collateral to secure public money under 31 C.F.R.
203).
g o r u n le ss the R e se r v e B ank d irects o th erw ise. (

8.

T hat th e C u stod ian sh all h old se c u r itie s on its p rem ises as a gen t for the
R e se r v e B ank w ith o u t c o m p e n sa tio n from th e R e se r v e B an k , free and
c lea r o f all lien s, ch a rg es or c la im s b y th e C u stod ian for sa fe k e e p in g or
o th e r w is e , and sh all m ark its b o o k s to sh o w that collateral is p le d g e d to
th e R e se r v e Bank.

9.

W ith resp ect to se c u r itie s p le d g e d under th is A p p e n d ix , to in d e m n ify and
hold th e R e se r v e Bank and th e U n ited S tates h a rm less from any lo s s that
is p ro x im a tely ca u se d by th e n e g lig e n c e or w illfu l m isc o n d u c t o f th e C u s­
to d ia n , or its e m p lo y e e s, or a g en ts, and that a rises from th e d estru ctio n ,
d isa p p ea ra n ce, th e ft, or u n au th orized rele a se o f su ch se cu ritie s.

10.

W ith resp ect to th o s e se c u r itie s p le d g e d under th is A p p e n d ix that d e c lin e
in v a lu e as p aym en ts o f p rin cip al are m ad e, to p rovid e to th e R e se r v e
B an k , on n ot le s s than a quarterly b a sis, a statem en t o f th e o r ig in a l fa ce
valu e and the v a lu e o f the rem ain in g b a la n ce on ea ch d ec lin in g - v a lu e s e ­
cu rity p led g ed . 1

11.

To c o m p ly w ith term s and c o n d itio n s sp e c ifie d b y th e R e se r v e B ank under
in stru ctio n s issu e d to p rescrib e th e rou tin e m e c h a n ic s o f p le d g in g c o lla t­
eral, ex c e p t that, in th e ev en t o f any in c o n s iste n c y b etw e e n th e term s o f
th is d o cu m en t and th e sp e c ifie d term s and c o n d itio n s or th e term s and




3

co n d itio n s o f th e C u sto d ia n ’s a d v ic e o f cu stod y, th e term s o f th is o ffe r to
con tract and ap p lication sh all p revail.
12.

To p erm it th e R e se r v e B ank to in sp e c t d u rin g th e C u sto d ia n ’s regu lar b u s i­
n e ss hours th e C u sto d ia n ’s sa fe k e e p in g p rem ises, b o o k s and record s o f
c u sto d ia l a c c o u n ts, and any se c u r itie s p le d g e d hereunder.

13.

To prom p tly resp on d in w r itin g to th e R e se r v e B a n k ’s p erio d ic req u ests
for v erifica tio n o f th e se c u r itie s in its c u sto d y that are p le d g e d to th e R e ­
se r v e Bank. S u ch req u ests w ill list th e in form ation required in an a d v ic e
o f c u sto d y (a s set forth in paragraph 4 ( d ) o f th is A p p e n d ix ) for all s e c u ­
r itie s w h ich th e R e se r v e B a n k ’s record s refle c t as b ein g h eld b y th e C u s­
tod ian and p le d g e d to th e R e se r v e B ank. T h e C u sto d ia n sh all resp on d in
w r itin g b y eith e r c o n fir m in g that it h o ld s all su ch se c u r itie s and that all
in form ation in th e R e se r v e B a n k ’s req u est is co rrect or b y s p e c ify in g any
d iffe r e n c e s r e fle c te d in its record s, w h ic h e v e r is appropriate.
N o th in g in th is A p p e n d ix a ffe c ts th e R e se r v e B a n k ’s su p e r v iso r y or r e g ­

u latory p ow ers, or any oth er rig h ts th e R e se r v e B ank m ay h ave w ith resp ect
to th e C u stod ian . I f th e U n ited States D ep artm en t o f th e T reasury is s u e s any
am en d m en t o f th is A g r e e m e n t, n o tic e w ill b e p rovid ed to th e C u sto d ia n b y th e
R e se r v e Bank 6 0 calen d ar d ays in ad van ce o f th e date su ch am en d m en t b e c o m e s
e ffe c tiv e , p rovid ed th e T reasury D ep a rtm en t n o tifie s th e R e se r v e B ank to g iv e
su ch n o tic e prior to that tim e, as th e T reasury D ep a rtm en t r e se r v e s th e righ t
to m ak e a m en d m en ts e ffe c tiv e im m ed ia tely (o r in few er than 6 0 calen d ar d a y s)
i f su ch n o tic e is im p ra ctic a l, u n n ecessa ry , or n ot in th e p u b lic in terest. U n le ss
o th e r w is e p rovid ed , any am en d m en t w ill apply to all p le d g e s o f se c u r itie s under
th is A p p e n d ix m ad e on or after th e e ffe c tiv e date o f th e am en d m en t.
T h e C u stod ian m ay r e sig n b y g iv in g 6 0 calen d ar d ays’ prior w ritten n o tic e
to b oth th e R e se r v e B ank and th e P ledgor. T h e re sig n in g C u sto d ia n sh a ll, on
th e e ffe c tiv e date o f its re sig n a tio n , a ss ig n , transfer, and d e liv e r to th e R e se r v e
B ank or th e su c c e s so r c u sto d ia n d e sig n a te d to th e C u stod ian b y th e R e se r v e
B ank in w r itin g , all fu n d s, se c u r itie s or o th er a sse ts h eld at that tim e b y th e
r e sig n in g C u sto d ia n under th is A p p e n d ix w ith o u t recou rse, rep resen tation , or
w arran ties o f any k in d , ex cep t as to acts or o m issio n s o f th e r esig n in g C u sto d ia n
or c la im s again st th e r e sig n in g C u sto d ia n arisin g under th is a g reem en t prior to,
or on th e e ffe c tiv e date o f, th e C u sto d ia n ’s resign ation .
T h e a cc e p ta n c e o f th is O ffer and th e d e sig n a tio n o f th e u n d ersig n ed in s ti­
tu tion as C u stod ian m ay b e revok ed by any R e se r v e Bank w ith resp ect to that
R e se r v e B ank, b y p rovid in g th e C u sto d ia n w ith a d van ce w ritten n o tic e o f su ch
revocation . T h e revocation sh all b e e ffe c tiv e ten calen d ar d ays after th e date the
n o tic e is sen t or tran sm itted . A c o p y o f su ch n o tic e sh all sim u lta n e o u sly be
tran sm itted to ea c h o f th e oth er R e se r v e B anks. T h e n o tic e o f revocation m ay
a lso co n ta in in stru ctio n s or orders to th e C u sto d ia n c o n c e r n in g th e a ssig n m e n t,




4

transfer, and d e liv e r y to th e R e se r v e B ank o f a ll fu n d s, se c u r itie s and o th er a s­
sets h eld b y th e C u stod ian und er th e term s o f th is A p p e n d ix . R ev o ca tio n shall
n ot a ffe c t th e R e se r v e B a n k ’s or th e U n ited States D ep artm en t o f th e T reasury’s
righ ts hereunder, w ith regard to any co lla tera l p le d g e d under th e A p p e n d ix prior
to revocation .
T h is O ffer to C on tract and A p p lica tio n for d e sig n a tio n as a T hird Party
C u sto d ia n o f C ollateral P le d g e d U n d er 3 1 C .F .R . Parts 2 0 2 and 2 0 3 su p ersed es
any prior a g reem en ts for th is p u rp ose w h ic h m ay curren tly b e in e ffe c t b e tw e e n
th e C u sto d ia n and th e R e se r v e B ank. T h e u n d ersig n ed d e p o sito r y in stitu tio n
a g rees that u p on a cc e p ta n c e b y th e F ed eral R e se r v e B ank o f N e w York, actin g
as F isc a l A g e n t o f th e U n ited S tates, th is d o c u m e n t shall e v id e n c e th e con tract
en tered in to b etw een th e S ecreta ry o f th e T reasury and th e C u stod ian .




E. G e r a l d C o r r ig a n ,

President.

5

EXHIBIT I
LETTER AGREEMENT FOR THIRD PARTY CUSTODY
OF TREASURY TAX AND LOAN COLLATERAL
[F ed eral R eserv e B ank o f N e w York
3 3 L ib erty Street
N ew York, N ew York 1 0 0 4 5
A ttention: C redit and D isc o u n t D ep artm en t]
or

[B u ffa lo Branch
F ed eral R e se r v e B ank o f N e w York
P.O. B o x 9 6 1
B u ffa lo , N ew York 1 4 2 4 0
A ttention: C o lle c tio n , L o a n s and
F isca l A g e n c y D iv is io n ]
G entlem en:
In order to q u a lify and b e d e sig n a te d b y you as a third-party c u sto d ia n for
any F ederal R eserv e B ank o f se c u r itie s p le d g e d to th e R e se r v e B ank b y any o th ­
er d e p o sito r y in stitu tio n (th e “P le d g o r ”) to secu re d e p o sits o f p u b lic m o n ey
under 3 1 C .F R . Parts 2 0 2 and 2 0 3 , and in con sid eration o f th e b e n e fits and
p r iv ile g e s related to su ch q u a lifica tio n and d e sig n a tio n , w e agree to th e p rovi­
sio n s o f A p p e n d ix A to your O p eratin g C ircu lar No. 1 8 , as r e v ised from tim e
to tim e. E n c lo se d is a list o f P led g o rs that h ave req u ested that w e act as their
c u sto d ia n for th is p urpose. W e agree to p rovid e y ou w ith an updated list o f su ch
P le d g o r s as ch a n g es are m ade.
T h is letter is sig n e d on our b e h a lf b y an o ffic e r d u ly au th o rized to ex e c u te
su ch a d o cu m en t, as is e v id e n c e d b y the c e r tific a te ex ecu ted below .




[Name of Depository Institution]
[Street Address]
[City or Town, State ]

[Zip Code]

[Signature of Authorized Officer]
P rin t N a m e:
T itle:
D a te:

6

I h ereb y certify, after review o f th is letter, A p p e n d ix A o f O p eratin g C ir­
cu lar No. 1 8 o f the F ed eral R e se r v e B ank o f N ew York, and th e p ertin en t r e g ­
u lation s is su e d b y th e D ep a rtm en t o f th e T reasury at T itle 3 1 , C o d e o f F ederal
R eg u la tio n s, Parts 2 0 2 and 2 0 3 , that th e

..........................................................

[name o f depository institution ]

a u th o rized to apply to b e a C u sto d ia n and that

is

.....................................................

[name o f authorized officer]

h as b e e n a u th orized and d irected to e x e c u te th is letter.
IN W IT N E S S W H E R E O F , I h ave sig n e d m y n am e [and a ffix e d th e sea l
o f th is d e p o sito r y in stitu tio n ].
By:

...................................................................................

[Signature o f Certifying Officer*]
[corporate seal, if any]
Print Name:
Title:
Date:

*

The officer making this certification shall have the authority to do so and must not be the same
officer signing the letter.




ACCEPTANCE
T h e F ed eral R e se r v e B ank o f N e w York [ , B u ffa lo B ran ch ], a ctin g as F isca l
A g e n t o f th e U n ited S tates, and on b e h a lf o f ea ch o f th e o th er F ed eral R e se r v e
B an k s, h ereb y d e sig n a te s

.......................................................................................

[name o f depository institution ]

as

third-party c u sto d ia n and a c c e p ts th e o ffe r to con tract m ad e b y th e cu sto d ia n ,
e ffe c tiv e on th e date set forth below , in a cco rd a n ce w ith th e p ro v isio n s o f A p ­
p en d ix A to th is B a n k ’s O p eratin g C ircu lar N o. 1 8 , as rev ised from tim e to tim e.




F ed eral R e se r v e B ank o f N ew York
[B u ffa lo B ranch]
as F isc a l A g e n t o f th e U n ited States
By:

...................................................................................

[Signature of Official]
Print Name:
Title:
Date:

8