Are there any collateral requirements when accessing PUDs?
Most states and municipalities require financial institutions to pledge securities as collateral to secure public deposit balances in excess of the $250,000 FDIC insurance limit. Municipalities and political subdivisions typically demand as collateral high-quality government securities such as U.S. Treasuries, federal agencies or municipal bonds. The administrative burden associated with managing collateral pledged against the uninsured portion of public deposits can be costly.
Another way to collateralize PUDs is by using FHLB Des Moines Letters of Credit. When accessing public deposits through the FHLB Des Moines Public Unit Deposit program the only method to collateralize the LGIP deposit is via LOC.