Academic journal article ABA Banking Journal

Old Tool Brings New Bucks to Oregon Bank

Academic journal article ABA Banking Journal

Old Tool Brings New Bucks to Oregon Bank

Article excerpt

Do rising deposit insurance premiums rankle you'? U.S. National Bank of Oregon recently raised $152 million in medium-term funds using bank notes--uninsured instruments that can be used like deposits but are exempt from insurance assessments.

The bank launched the effort through a network of investment dealers in midMarch and hit the level mentioned only a month later. At one point the bank pulled back because demand for the instruments exceeded its needs, according to R. Bruce Mauger, senior vice-president and treasurer of the Portland, Ore., bank.

Bank notes are not a new idea, but are used infrequently, says Mauger, a member of the ABA Funds Management and Financial Markets Division executive committee. The bank added its own twist by setting up its program on a continuously offered" basis. This permits the institution to tap the institutional investors the instruments are aimed at when the technique best suits the bank's asset-liability mix.

Continuous offering also allows the bank to sell the instruments to investors as they are desired, rather than selling them to dealers in bulk. Mauger says this helps avoid the possibility of the bank's competing with its own older notes when raising fresh funds. The instruments are negotiable, however, and can be sold in the secondary market. …

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