7-3-1320. Liability for deposited funds. (1) When the funds of the municipality are deposited and kept in designated banks according to the provisions of this part, the treasurer and the sureties on the treasurer's official bond are exempt from all liability for the loss of any funds deposited if the loss is caused by the failure, bankruptcy, or any other act or default of the banks, but the want of care or due diligence on the part of the treasurer or commission in protecting the municipality against loss does not exempt the treasurer, the members of the commission, or sureties on their respective bonds from liability.

(2) This section may not deprive the municipality of any right or remedy against a defaulting bank or against its officers or stockholders.