Letters of Credit

New Jersey Governmental Unit Deposit Protection Act (GUDPA)

The Governmental Unit Deposit Protection Act is a supplemental insurance program enacted by the New Jersey Legislature to protect the public deposits of municipalities and local government agencies. The GUDPA program is administered by the Commissioner of the New Jersey Department of Banking and Insurance.

Currently, the first $250,000 of governmental deposits in each insured depository are protected by the Federal Deposit Insurance (FDIC) or the National Credit Union Share Insurance Fund (NCUSIF) in most situations. Public funds in excess of the FDIC or NCUSIF insured amounts are protected by GUDPA.

Local government entities are required by law to deposit their funds in a depository institution that protects such funds pursuant to GUDPA. State and federally chartered banks, savings banks, savings and loan associations, and credit unions with offices in New Jersey must be certified by the Department of Banking and Insurance for participation in the GUDPA system before a local government entity can open a depository account with them.


Some of the GUDPA application requirements for new participants are:

  • Set up an account with an approved custodian such as the Federal Home Loan Bank of New York – if you are using the FHLBNY for safekeeping, you can supply a copy of the Correspondent Services Agreement that you completed for membership. (If you need a copy please contact us.)
  • Provide a fully executed copy of your custodial agreement that names the “Commissioner, New Jersey Department of Banking and Insurance” as the beneficiary – use the form SFK-005 to pledge securities.


Each depository participating in the GUDPA program must pledge eligible collateral equal to at least 5% of the average amount of its public deposits, and 100% of the average amount of its public funds in excess of the lesser of 75% of its capital funds or $200 million. New participants are required to collateralize 100% of their public deposits for a period of at least twelve months.

The FHLBNY can help you efficiently collateralize your public deposits. Members can:

  • Use our Municipal Letter of Credit (MULOC) product, specifically designed for the collateralization of state, city, court, or local government deposits. MULOCs are easy to use, require no capital stock purchase, and can be collateralized with the same assets (loans and securities) that are used to secure FHLBNY advances; or
  • Use our Refundable MULOC product that offers all the benefits of a MULOC, but is more efficient for collateralizing transaction accounts since it provides an opportunity for a partial fee reimbursement if the MULOC is not fully utilized.

Alternatively, you can pledge securities already held with us, by using form SFK-005.



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