Illinois law allows any FDIC-insured bank to hold investments and deposits of public funds. 30 ILCS 235/2(b)30 ILCS 225/1. The Public Funds Investment Act imposes several requirements on banks that receive public funds, and as discussed below, each unit of government may impose additional requirements. 30 ILCS 235/6(a).

In Illinois, there are no rules or regulations adopted at the state level that are directly on point regarding the investment policies and collateral requirements of local government units. Instead, all public agencies must adopt written investment policies, including “guidelines regarding collateral requirements, if any, for the deposit of public funds” and “if applicable, guidelines for contractual arrangements for the custody and safekeeping of that collateral.” 30 ILCS 235/2.5. The Illinois State Treasurer’s Office’s offers a template for local governments to use, the Sample Investment Policy for Local Governments. (The Treasurer’s Office has posted its own Investment Policy and List of Financial Assets Qualified for Collateral to Secure Deposits and Repurchase Agreements, which detail the State Treasurer’s collateral requirements, but each local municipality may have different policies.)

If the bank is holding public deposits over the FDIC insurance limit, some reporting requirements may apply. Banks holding public funds are required to furnish its two most recent call reports to the corporate authorities of the public agency. 30 ILCS 235/6. However, that requirement is waived if the following three requirements are met: the funds are held in “an interest-bearing savings account, interest-bearing certificate of deposit, or interest-bearing time deposit,” the bank is located in Illinois, and the funds are fully FDIC-insured. 30 ILCS 235/6.5.