The Municipal Bank: Compliance, Capitalization, Liquidity, and Risk
July 1, 2016
By Karl Beitel
This paper is a technical companion to Municipal Banking: An Overview. It primarily addresses issues pertaining to capitalization, funding, lending, liquidity, and risk.
The paper is structured as follows: The first section addresses capitalization and ownership, and mechanisms for incorporation that will ensure that the Bank, once constituted, continues to fulfill its founding policy mandate and social objectives. Issues pertaining to compliance with FDIC capital requirements are discussed. This is followed by a discussion of factors that must be addressed in order for a Municipal Bank to serve as the City’s primary depository bank. The final sections discuss options for funding the Banks ongoing lending and investment operations, ensuring liquidity, and means for providing robust financial safeguards for the City.