A little-noticed bill passed by the General Assembly will continue to provide a liquidity lift to the state and some of Connecticut’s larger banks and credit unions and the communities they serve.
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A little-noticed bill passed by the General Assembly will continue to provide a liquidity lift to the state and some of Connecticut's larger banks and credit unions and the communities they serve.
House bill 6320 was recently adopted by the House and Senate and awaits the governor's signature.
Backed largely by the Credit Union League of Connecticut, the measure expands an existing state program — first implemented in 2006 — giving the state Treasurer's office authority to deposit some of the state's funds in community banks and credit unions of a certain asset size.
Currently, the asset maximum for eligible financial institutions is $500 million, credit union and state officials say. That limit was fine years ago, when it was first adopted, but supporters say the growth in bank and credit-union deposits/loans and membership, along with mergers, have yielded a handful of state financial institutions whose assets approach or exceed $500 million.
As a result, House bill 6320 doubles that asset-threshold maximum to $1 billion.
Banks, thrifts and credit unions prize these stable sources of funds from states, municipalities and large depositors for the liquidity needed to carry out their lending and other fiduciary functions.
“This bill lifts the asset threshold in order to make more financial institutions eligible for participation, helping meet the treasurer's need for a safe investment that provides liquidity,'' Credit Union League of CT President Jill Nowacki said via email. “The fact that all of the proceeds stay within our Connecticut communities ties very well to credit unions' mission of serving their communities.”
According to state Treasurer Denise L. Nappier's office, 39 state banks and 11 credit unions initially qualified for the program. Currently, only 20 banks and 12 credit unions qualify. Increasing the asset limit would allow an additional 10 banks and one credit union to participate.
Since the program began the Treasury has made $478 million in investments with 10 community banks and credit unions through a monthly competitive bidding process, treasurer's spokesman David Barrett said. Presently, there is $22 million invested through the program.
New Haven's Connex Credit Union is one of those qualified bidders. When the treasury-deposit program began, Connex's assets were about $200 million. Today, its assets are $513 million — above the current threshold.
As a result, Connex lost a matured $4 million state Treasury CD in March, CEO Frank Mancini said.
Mancini says he's hopeful the governor signs the measure by early June, so Connex can regain access to Treasury deposits, which the credit union has reinvested into members' auto and home loans.
– Gregory Seay
