(a) Pursuant to HOLA section 5(c)(1)(H), a Federal savings association may invest in obligations issued by any state, territory, possession, or political subdivision thereof (``governmental entity''), subject to appropriate underwriting and the following conditions: ------------------------------------------------------------------------
Aggregate Per-issuer
limitation limitation------------------------------------------------------------------------
(1) General obligations........ None.............. None.
(2) Other obligations of a None.............. 10% of the
governmental entity (e.g., institution's
revenue bonds) if the issuer total capital.
has an adequate capacity to
meet financial commitments
under the security for the
projected life of the asset or
exposure. An issuer has an
adequate capacity to meet
financial commitments if the
risk of default by the obligor
is low and the full and timely
repayment of principal and
interest is expected.
(3) Obligations of a As approved by the 10% of the
governmental entity that do not OCC. institution's
qualify under any other total capital.
paragraph but are approved by
the OCC.------------------------------------------------------------------------
(b) What is a political subdivision? Political subdivision means a county, city, town, or other municipal corporation, a public authority, or a publicly-owned entity that is an instrumentality of a state or a municipal corporation.
(c) What is a general obligation of a state or political subdivision? A general obligation is an obligation that is guaranteed by the full faith and credit of a state or political subdivision that has the power to tax. Indirect payments, such as through a special fund, may qualify as general obligations if a state or political subdivision with taxing authority has unconditionally agreed to provide funds to cover payments.
(d) For all securities, the institution must consider, as appropriate, the interest rate, credit, liquidity, price, transaction, and other risks associated with the investment activity and determine that such investment is appropriate for the institution. The institution must also determine that the obligor has adequate resources and willingness to provide for all required payments on its obligations in a timely manner. [76 FR 49030, Aug. 9, 2011, as amended at 77 FR 35258, June 13, 2012]