(a) An eligible lending institution shall deposit with a custodian a pledged security. The custodian and the executive administrator shall agree in writing on the terms and conditions for securing a linked deposit.
(b) A custodian must be approved by the executive administrator, either in the linked deposit agreement or separately, and be:
  (1) a state or national bank that:
    (A) is designated by the comptroller as a state depository;
    (B) has its main office or a branch office in this state; and
    (C) has a capital stock and permanent surplus of $5 million or more;
  (2) the Texas Treasury Safekeeping Trust Company;
  (3) a Federal Reserve Bank or a branch of a Federal Reserve Bank; or
  (4) a federal home loan bank.
(c) A custodian holds in trust the pledged securities used to secure the board's deposit in the eligible lending institution.
(d) A custodian, whether acting alone or through a permitted institution under §367.24 of this title (relating to Custodian's Deposit of Pledged Security with Another Institution), is for all purposes the bailee or agent of the board.
(e) On receipt of a pledged security, a custodian shall:
  (1) immediately identify on its books and records, by book entry or another method, the pledge of the security to the board; and
  (2) promptly issue and deliver to the executive administrator a trust receipt for the pledged security. If the custodian deposits the pledged security pursuant to §367.24 of this title, the trust receipt shall so indicate.
(f) An eligible lending institution may not itself be the custodian of securities it pledges for the linked deposit, nor may it deposit the securities with an entity of which the eligible lending institution is a branch.
(g) The eligible lending institution shall pay any charges of the custodian bank for accepting and holding the securities.

Source Note: The provisions of this §367.23 adopted to be effective May 9, 2005, 30 TexReg 2680