What is the limitation on how much a town can deposit to one bank?

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Multiple Choice

What is the limitation on how much a town can deposit to one bank?

Public funds deposit limits are set to reduce the risk of a municipality’s money being tied to a single bank. The limit uses the bank’s own size and strength as a measure of risk-bearing ability, expressed as a percentage of the bank’s capital and surplus. The specific rule allows deposits to a single bank up to 60% of that bank’s capital and surplus. This means that as a bank grows and strengthens, the amount a town can place with it grows too, but never beyond that 60% threshold. If more funds must be placed, the town should spread deposits across multiple banks or invest in approved securities to maintain diversification and safety.

Public funds deposit limits are set to reduce the risk of a municipality’s money being tied to a single bank. The limit uses the bank’s own size and strength as a measure of risk-bearing ability, expressed as a percentage of the bank’s capital and surplus. The specific rule allows deposits to a single bank up to 60% of that bank’s capital and surplus. This means that as a bank grows and strengthens, the amount a town can place with it grows too, but never beyond that 60% threshold. If more funds must be placed, the town should spread deposits across multiple banks or invest in approved securities to maintain diversification and safety.

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