ELIGIBLE COLLATERAL.

(a) In this section, "public agency" means a board, authority, agency, department, commission, political subdivision, municipal corporation, district, public corporation, body politic, instrumentality of this state, or any other type of political or governmental entity of this state.

(b) For the purposes of Section 404.022, collateral eligible to be pledged with the comptroller to secure state deposits includes:

(1) direct obligations of or obligations the principal and interest of which are guaranteed by the United States government;

(2) direct obligations of or obligations guaranteed by agencies or instrumentalities of the United States government, including letters of credit; and

(3) a general or special obligation issued by a public agency and approved by the attorney general that is payable from taxes, revenues, or both.

(c) If pledged collateral consists of securities with a declining principal balance, the market value of the collateral pledged may not be less than 125 percent of the amount of the state deposits to be secured.

(d) Eligible collateral includes only:

(1) a security with fixed, stated rates; or

(2) a letter of credit described by Subsection (b)(2) for a stated amount.

(e) A loss sustained by a depository that has secured its deposits by collateral may be enforced against the collateral.

(f) The comptroller may reject at any time collateral tendered by a state depository without assigning a reason for the rejection, and the comptroller's action is final and not subject to review.

(g) Collateral is not required for deposits to the extent that the deposits are insured by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund.