(a) Default shall be deemed to occur whenever any state depository fails to return any state deposit including earned interest when due in accordance with the terms of the deposit contract.

(b) In all other situations, as defined in § 9-4-102, where the safety or security of state deposits is in doubt, the state treasurer shall determine whether default has occurred, and the date on which it occurred, following consultation with the other members of the state funding board, the attorney general and reporter and the commissioner of financial institutions. Once the state treasurer has made such a determination, the other state officials with whom the state treasurer consulted shall be advised.

(c) In the event of default by any state depository, the state depository shall be responsible for any loss to the state.

(d) Such loss shall be satisfied out of collateral pledged by the state depository to whatever extent possible.

(e) Collateral pledged in accordance with this part may be sold by the state treasurer or, at the direction of the state treasurer, by the trustee custodian or any other person, including a federal agency, holding such collateral. In the alternative, the state treasurer may choose to hold such collateral. If the state treasurer holds such collateral, loss shall be reduced by the market value of the collateral and any accrued interest thereon as of the date of default.

(f) The attorney general and reporter is authorized to prosecute, in the name of the state, actions for recovery of any loss incurred by the state under this section.

(g) Excess proceeds, if any, realized from the sale of collateral will be returned to the defaulting state depository or its successor.