When a city, county, school district or authority picks a bank, it usually does so through a formal solicitation. The process is public and fairly standard, but the decision to change banks often starts long before the RFP is issued. This guide covers what these solicitations are called, what they ask for, how the timeline usually runs, and how practices vary from state to state. It's written for government bankers and treasury officers, and for anyone else who wants to understand how local governments choose a bank.
What governments call these solicitations
There's no standard name. The same procurement can show up under several labels:
- Depository services RFP. The most direct term, common for the main operating relationship.
- Banking services RFP, or "RFP for banking and treasury management services." Often the broadest version, covering accounts, payments and online banking.
- Depository for municipal funds, sometimes "designation of official depository." The language of the law that requires the government to name where its money is held.
- Collateral and safekeeping services. Sometimes bid separately when the government wants a third-party custodian to hold pledged collateral or its investment securities.
- Treasury management services RFP. Used when the focus is on payments, receivables and cash concentration rather than the deposit itself.
- Request for qualifications (RFQ) for banking services. Used to shortlist banks before asking for pricing.
Some governments bid everything as one package. Others split it: one bank for operating accounts, another for payroll or lockbox, and a separate custodian for collateral. A banker who only watches for "depository RFP" will miss a good share of these opportunities.
What the RFP typically asks for
Requirements scale with the size of the entity, but most banking services RFPs cover the same ground.
Account structure and treasury services
Expect a list of current accounts: general operating, payroll, tax collection, capital projects, trust and escrow. The RFP will ask how you'd structure them, including zero-balance accounts and sweeps, and for your capabilities in ACH origination, wires, remote deposit capture, positive pay and other check fraud controls, and disbursement services.
Collateralization and safekeeping
Deposits above FDIC insurance limits must be secured, and the RFP will ask exactly how: which collateral you'll pledge, who will hold it, how often it's valued and reported, and how you comply with state law. Some governments accept Federal Home Loan Bank letters of credit in place of securities. Collateral terms are rarely the deciding factor, but a weak answer here can eliminate a bank.
Fees and account analysis
Most RFPs include a volume schedule and ask for pricing on every service, a sample account analysis statement, and a pro forma total cost. They'll ask whether fees are offset by earnings credit or charged directly, and how long pricing is guaranteed. Total cost, net of earnings credit, is usually the largest single scoring factor.
Earnings credit and interest
Governments want to know how the earnings credit rate (ECR) is set (fixed, tied to an index, or at the bank's discretion), what interest-bearing options exist, and whether balances can be swept into money market funds or repurchase agreements where state law allows. Rate guarantees and how the ECR tracks market rates over the contract term get close attention.
Online banking and security
Expect questions about the online platform: user entitlements, dual approval for payments, balance and transaction reporting, file formats for the government's accounting or ERP system, cybersecurity controls, and business continuity plans.
Lockbox and receivables
Entities that collect taxes, utility bills or fees will ask about lockbox processing, image delivery, posting files, and online and card payment options. Merchant services are sometimes folded into the same RFP.
Bank qualifications
Finally, the bank itself: financial strength and ratings, local branch presence, government client references, Community Reinvestment Act rating, the proposed service team, and a transition plan.
How the evaluation works
Most local governments use a small evaluation committee, usually the CFO or finance director, the treasurer or business administrator, and sometimes an outside financial advisor. Common criteria are total cost, service capabilities, collateral and financial strength, experience with similar governments, the transition plan, and local presence. Finalists may be asked to present.
The governing body then approves the award, and the bank and government sign a banking services agreement. Conversion follows: new accounts, new check stock, updated instructions for vendors and payroll, and a period of running old and new accounts side by side. Conversion is a lot of work for a finance office. That's one reason incumbents often keep relationships for many years, and why a government that does decide to switch usually has a clear reason.
Typical timing, and why the posted RFP is late
A depository change usually moves through these stages:
- A reason to change emerges. Service problems, fee increases, a new finance officer, a merger at the incumbent bank, a push for better technology or a higher earnings credit, or a policy requiring periodic rebids.
- Internal fact-finding. The finance team gathers current fees and volumes, may have informal conversations with other banks, and decides whether to go out to bid.
- Approval to issue an RFP.
- The RFP is drafted and issued. Response windows are typically [PLACEHOLDER: typical response window].
- Evaluation, interviews and award.
- Conversion, typically [PLACEHOLDER: typical conversion period].
Contracts usually run for several years, often with renewal options ([PLACEHOLDER: typical contract term]).
Stages one through three can take months. A bank that waits for stage four arrives after the requirements are written, after the incumbent has had time to respond to the government's concerns, and often after competing banks have already met the finance team.
Once an RFP is issued, most procurement rules restrict contact to a single named point of contact until the award. The period before the RFP is often the only time a new bank can have an open conversation about what the government needs.
Getting in early doesn't guarantee a win. But it lets you understand the entity's priorities, make sure the RFP doesn't rule out your bank on a technicality, and show up as a known name instead of a cold response.
How practices vary by state
Banking services RFPs look much the same everywhere, but the rules underneath them don't. Three differences matter most to a bank deciding whether and how to respond. The examples below are a sample, not a complete list.
Collateral rules
Every state sets its own requirements for securing public deposits above FDIC insurance limits. In New Jersey, local governments must keep their funds in a public depository certified under the Governmental Unit Deposit Protection Act (GUDPA, N.J.S.A. 17:9-41 et seq.). Under the Department of Banking and Insurance's published rules, a well-capitalized depository pledges collateral equal to at least 5% of its average uninsured public deposits, plus 100% of uninsured public funds above the lesser of 75% of its capital or $200 million.
In Washington, the Public Deposit Protection Commission decides which institutions qualify as public depositaries, and the collateral each one must pledge depends on its capital position and its Washington public deposits (chapter 39.58 RCW). In California, banks holding local agency deposits pledge collateral and file weekly and quarterly reports under the Local Agency Security Program, administered by the Department of Financial Protection and Innovation (Government Code sections 53630 through 53686).
Pooled versus dedicated collateral
Some states let a bank secure all of its public deposits with one pool of collateral. Others have traditionally required a separate pledge for each public depositor, and some allow both. The choice affects a bank's operating cost and how much collateral it ties up.
- Texas historically required each public entity's deposits to be collateralized individually under Government Code Chapter 2257. Since 2009, banks can instead join an optional pooled collateral program run by the Comptroller, with one aggregate collateral requirement and reporting to a single state office.
- Iowa has banks pledge collateral to the Treasurer of State, who acts as agent for all public depositors at the bank (Iowa Code chapter 12C). If a bank fails and its collateral falls short, a State Sinking Fund and, if needed, assessments on other banks holding public funds cover the remaining loss.
- California allows securities securing local agency deposits to be pooled and held by approved agents of depository, who report changes and certify market values to the state.
Shared-loss features like Iowa's and New Jersey's mean a bank can be assessed for another bank's failure. That's worth understanding before you take on large public balances in a new state.
Who approves the depository
The person who signs off shapes what the RFP is really asking. In Iowa, the governing body (a county board of supervisors, city council or school board, for example) must approve each depository in writing and set the maximum amount that may be kept there. In New Jersey, each local unit's governing body approves a cash management plan every year that designates its public depositories (N.J.S.A. 40A:5-14). In Washington, a state commission decides which institutions qualify to hold public deposits at all, before any local government chooses among them.
Selling into a state you haven't worked in before? Read its public deposit statute and the state agency's guidance before you price a response.
How to prepare
- Know your collateral position. Which states you're qualified to hold public deposits in, whether you use pooled or dedicated collateral, and how much public money you can secure without straining your balance sheet.
- Have government pricing ready. A standard fee schedule, your ECR approach, and a sample account analysis you can adapt quickly.
- Line up references. Current government clients who'll take a call from a finance director.
- Keep a conversion plan template. A credible, low-disruption transition plan answers the biggest unspoken objection to switching.
- Know which entities in your footprint are likely to change, and meet them before the RFP is drafted.
How Public Funds Signal helps
Public Funds Signal tracks local governments in the territories our customers sell into for early signs they'll change depository banks or rebid banking services. Each alert names the entity, the expected change, the estimated timing and the incumbent where known, with supporting documentation. That gives your team the months before the RFP instead of the weeks after it.
See how Public Funds Signal works for government banking teams →
This guide is general information, not legal advice. Statutes and regulations change; confirm current requirements with the relevant state agency or counsel before relying on them.