A. Eligible collateral shall be held as provided in this article or by policy of the administrator. Eligible collateral shall be held in the custody of any bank, including a federal reserve bank, or any depository trust company.

B. Each eligible depository shall provide in a written deposit or pledge agreement between the eligible depository and the custodian of the collateral, or in such other manner as prescribed by the administrator by policy, that:

1. In the event of default or insolvency of the eligible depository for which the collateral is held, the custodian shall surrender the collateral to the administrator.

2. The custodian shall reasonably make available to the administrator any books, records and papers pertaining thereto for any examination or other reason necessary for the administration of this article.

C. An eligible depository at any time may make substitutions of eligible collateral maintained or pledged for the purposes of this article and shall at all times be entitled to collect and retain all income derived from the collateral without restriction. The authorization to make substitutions of eligible collateral pursuant to this subsection may be suspended or revoked by the administrator if the eligible depository has become the subject of increased regulatory oversight as a result of the eligible depository’s failure to maintain capital standards required by the depository’s primary regulator.