[Federal Register Volume 62, Number 141 (Wednesday, July 23, 1997)]
[Proposed Rules]
[Pages 39477-39490]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-19157]
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DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
12 CFR Parts 545, 550 and 563e
[No. 97-68]
RIN 1550-AB09
Fiduciary Powers of Federal Savings Associations; Community
Reinvestment Act
AGENCY: Office of Thrift Supervision, Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Office of Thrift Supervision (OTS) proposes to revise its
fiduciary powers regulations in order to promote the more efficient
operation and supervision of Federal savings associations' fiduciary
activities. The proposed changes are intended to update, clarify, and
streamline OTS regulations, to incorporate significant interpretive
guidance, and to eliminate unnecessary regulatory burden. OTS proposes
these revisions pursuant to the Regulatory Reinvention Initiative of
the Vice President's National Performance Review (Reinvention
Initiative) and section 303 of the Community Development and Regulatory
Improvement Act of 1994 (CDRIA). OTS also proposes to amend its
Community Reinvestment Act (CRA) regulations. The proposed change would
bring the scope of OTS's CRA regulation into accord with the CRA
regulations of the other federal banking agencies. It would exempt from
the CRA regulations savings associations that do not perform commercial
or retail banking services by granting credit to the public in the
ordinary course of business.
DATES: Comments must be received on or before September 22, 1997.
ADDRESSES: Send comments to Manager, Dissemination Branch, Records
Management and Information Policy, Office of Thrift Supervision, 1700 G
Street, N.W., Washington, D.C. 20552, Attention Docket No. 97-68. These
submissions may also be hand-delivered to 1700 G Street, N.W., from
9:00 A.M. to 5:00 P.M. on business days; sent by facsimile transmission
to FAX Number (202) 906-7755; or sent by e-mail to
[email protected]. Those commenting by e-mail should include
their name and telephone number. Comments will be available for
inspection at 1700 G Street, N.W., from 9:00 A.M. until 4:00 P.M. on
business days.
FOR FURTHER INFORMATION CONTACT: Larry Clark, Senior Manager,
Compliance and Trust Programs, Compliance Policy, (202) 906-5628;
Timothy Leary, Counsel (Banking and Finance), (202) 906-7170, or Karen
Osterloh, Assistant Chief Counsel, (202) 906-6639, Regulations and
Legislation Division, Chief Counsel's Office, Office of Thrift
Supervision, 1700 G Street, N.W., Washington, D.C. 20552.
SUPPLEMENTARY INFORMATION:
II. Background
In 1995, pursuant to the Reinvention Initiative and section 303 of
CDRIA, OTS conducted a comprehensive review of its rules and
regulations. As part of that review, OTS identified its trust
regulations at 12 CFR Part 550 for updating and streamlining.
Part 550 is promulgated under Section 5(n) of the Home Owners' Loan
Act (HOLA), 12 U.S.C. 1464(n), which authorizes the Director of OTS to
authorize a Federal savings association to exercise fiduciary powers.
Congress enacted section 5(n) in order to give Federal savings
associations the ``ability to offer trust services on the same basis as
national banks'' and to ``enhance the ability of thrifts to offer
complete financial service to the consumer.''1
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\1\ S. Rep. 96-368 at 13 (1980), reprinted in 1980 U.S.C.C.A.N.
248. Congress further amended Sec. 5(n) in the Financial
Institutions Reform, Recovery and Enforcement Act (``FIRREA'') of
1989. Pub. L. 101-73.
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As originally enacted, section 5(n) of the HOLA empowered the
Federal Home Loan Bank Board (FHLBB), the predecessor agency to OTS, to
issue regulations regarding the proper exercise of Federal association
trust powers.2 Pursuant to that authority, the FHLBB issued
the current part 550 in December, 1980.3 These regulations
have not been substantially changed since their promulgation.
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\2\ 12 U.S.C. 1464(n)(10)(D)(1980).
\3\ 45 FR 82162 (December 15, 1980).
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Since 1980, however, much about Federal savings associations'
fiduciary business has changed. These changes have affected the nature
and scope of the fiduciary services that associations offer, and the
structures and operational methods that associations use to deliver
those services. OTS's primary goals in revising part 550 are to
accommodate these changes, remove unnecessary regulatory burden, and
facilitate the continued development of Federal
[[Page 39478]]
savings associations' fiduciary business consistent with safe and sound
banking practices.
Today's proposal has several themes. First, the proposal recognizes
that the geographic and organizational structure of many Federal
savings associations' fiduciary operations has changed considerably
over the years. Consequently, OTS proposes to adjust part 550 so that
its requirements are workable for both large, multi-state fiduciary
organizations and small institutions that conduct fiduciary activities
primarily on a local basis.
Second, Federal savings associations' fiduciary activities, in
several respects, are subject to State law. In some cases, OTS has the
flexibility to prescribe a uniform Federal standard or to direct
Federal savings associations to follow State law. In the proposal, OTS
has attempted to strike an appropriate balance between Federal and
State law.
Third, over the years, part 550 has been interpreted to apply to
investment advisory activities and related services which do not
involve the association's exercise of investment discretion. In some
cases, savings associations engaged in these activities operate under
different standards than other financial service providers that conduct
the same business.
Finally, consistent with section 303 of CDRIA, the proposal
conforms OTS rules more closely to those rules of other Federal banking
agencies, specifically the rules issued by the Office of the
Comptroller of the Currency (OCC) at 12 CFR Part 9. Section 5(n) of the
HOLA closely resembles 12 U.S.C. 92a, which authorizes the OCC to grant
fiduciary powers to national banks. In December 1996, the OCC
comprehensively revised its rules governing national banks' fiduciary
operations. 61 FR 68543 (December 30, 1996). To promote continuity and
reasonable consistency in the exercise of fiduciary powers by
Federally-chartered financial institutions, OTS's proposal draws
extensively on the OCC's final rule and the comments the OCC received
on its proposed rule. As a consequence, today's proposal more
accurately reflects current legal, regulatory, and business
developments in the area of fiduciary services and activities.
II. Section-by-Section Description of the Proposal
Proposed Sec. 550.1 (Authority and Scope)
Proposed Sec. 550.1 is a new provision. It explicitly states the
statutory authority for, and the purpose and scope of, part 550.
Proposed Sec. 550.2 (Definitions)
The proposal moves the definitions currently found at Sec. 550.1 to
proposed Sec. 550.2. Some definitions are removed and others are added.
Significant changes are highlighted below.
Affiliate
The proposal adds a definition of ``affiliate'' to part 550. The
proposed definition follows the OCC's fiduciary powers regulation by
cross referencing the definition in the Federal Reserve Act at 12
U.S.C. 221a(b). That definition varies from OTS's current default
definition of ``affiliate'' found at 12 CFR 561.4. Specifically, the
Federal Reserve Act definition includes holding companies as
affiliates, whereas OTS's standard definition does not. To reflect the
variety of corporate structures through which Federal savings
associations exercise their fiduciary powers, and to promote regulatory
consistency with the OCC's new Rule 9, OTS proposes to adopt the
Federal Reserve Act definition of ``affiliate.''
Applicable Law
The term ``local law'' is used throughout existing part 550.
Currently, Sec. 550.1(g) defines local law as the law of the State or
other jurisdiction governing the fiduciary relationship. The proposal
would replace the term ``local law'' with ``applicable law.'' This
change would clarify that the legal authority governing a Federal
savings association's fiduciary relationships may include Federal law
and regulations governing fiduciary relationships, State laws governing
these relationships, the terms of the instrument governing a fiduciary
relationship, and any court order pertaining to the
relationship.4 Applicable law would not incorporate any
State law or other body of authority that would not otherwise apply to
a Federal savings association's fiduciary activities, such as
licensing, examination, access to examination reports, and other
matters left to Federal law under this regulation.
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\4\ Relevant Federal law includes the HOLA (12 U.S.C. 1461 et
seq.), the Employee Retirement Income Security Act of 1974 (29
U.S.C. 1001 et seq.), the Securities Act of 1933 (15 U.S.C. 77a et
seq.), the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.),
the Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.), the
Investment Advisor's Act of 1940 (15 U.S.C. 80b-1 et seq.), the
Trust Indenture Act of 1939 (15 U.S.C. 77aaa et seq.), the Internal
Revenue Code of 1986 (26 U.S.C. 1 et seq.), and rules issued
pursuant to those acts.
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Recently, a number of savings associations have asked OTS about how
State law applies to their exercise of fiduciary powers, including when
those fiduciary powers are exercised in an operating subsidiary or
other subsidiary. Section 5(n) of the HOLA recognizes a specific role
for State law in Federal savings associations' exercise of fiduciary
powers, unlike other operations of Federal savings associations.
In a recent legal opinion, OTS determined that State law applies to
Federal savings associations' fiduciary activities to the extent
specifically provided by section 5(n) of the HOLA. This includes the
scope of those powers (Sec. 5(n)(1)), capitalization requirements
(Sec. 5(n)(2)), the deposit of securities with State authorities
(Sec. 5(n)(5)), and provision of an oath or affidavit from trust
fiduciaries (Sec. 5(n)(6)).5 OTS requests comment on the
scope of federal preemption for Federal savings associations and their
subsidiaries in dealing with other State law requirements in this area.
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\5\ OTS Op. Chief Counsel (March 28, 1996) at 8-9.
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Fiduciary Capacity
Under existing Sec. 550.1(c), fiduciary means ``a Federal savings
association undertaking to act alone, through an affiliate, or jointly
with others primarily for the benefit of another in all matters
connected with its undertaking.'' The current definition also lists the
specific fiduciary capacities enumerated in section 5(n) of the HOLA
(trustee, executor, administrator, guardian) and several other
fiduciary capacities in which State banks, trust companies, or other
corporations competing with Federal savings corporations are permitted
to act under State law (receiver, managing agent, registrar of stocks
and bonds, escrow, transfer, or paying agent, and trustee of employee
pension, welfare, and profit sharing trust).
Under the proposal, the term ``fiduciary capacity'' would replace
``fiduciary.'' The proposed definition of ``fiduciary capacity''
attempts to establish a clear, objective boundary for the coverage of
Part 550 while retaining the traditional core concept that serving in a
fiduciary capacity involves acting on another's behalf. Under the
proposed definition, fiduciary capacity includes specific fiduciary
activities, such as acting as trustee, executor, administrator,
registrar of stocks and bonds, transfer agent, guardian, assignee,
receiver, or custodian under a uniform gift to minors act. In addition,
fiduciary capacity would include any capacity in which the association
possesses investment discretion on behalf of another, and any other
similar capacity that OTS authorizes under 12 U.S.C. 1464(n).
[[Page 39479]]
The proposed definition also includes a Federal savings association
that acts as an investment advisor for a fee, even though the
association may not act in any traditional fiduciary capacity or
exercise investment discretion.6 This provision recognizes
that when a customer pays a fee in return for investment advice,
whether or not the customer follows that advice, the customer has a
reasonable expectation of receiving advice that is free of conflicts of
interest. It is also consistent with other Federal statutes that
provide enhanced protection to customers of certain investment advisers
who receive a fee.7
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\6\ Part 550 continues to apply to associations acting in the
enumerated fiduciary capacities (e.g., trustee) even though the
association has no investment discretion and receives no fee for
investment advice. OTS notes, however, that a Federal savings
association that acts as trustee of certain stock bonus, pension or
profit sharing plans, IRAs, and fiduciary accounts with no active
fiduciary duties may be exempted from part 550 under proposed
Sec. 550.3.
\7\ See e.g., 29 U.S.C. 1002(21)(A) (fiduciaries of ERISA
accounts); 15 U.S.C. 80b-2(a)(11) (Investment Advisers Act, which
generally applies to any person who, for compensation, engages in
the business of advising others. Although banks are exempt from the
Investment Advisers Act, Federal savings associations are not, and
investment advisers employed by Federal savings associations must
therefore register with the SEC).
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On July 9, 1997, the OCC proposed to issue an interpretive ruling
codifying a recent interpretive letter that clarified how the OCC
intends to apply the term ``acting as an investment adviser for a
fee.'' 8 The OCC interprets the term ``investment adviser''
to generally mean a national bank that provides advice or
recommendations concerning the purchase or sale of specific securities,
such as a national bank engaged in portfolio advisory and management
activities (including acting as investment adviser to a mutual fund).
The qualifying phrase ``if the bank receives a fee for its investment
advice'' excludes those activities in which the investment advice is
merely incidental to other services.
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\8\ 62 FR 36746 (July 9, 1997), codifying Interpretive Letter
No. 769 (January 28, 1997).
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Under the OCC interpretation, a national bank that engages in full-
service brokerage activities may provide investment advice for a fee,
depending upon the commission structure and the specific facts. The OCC
will consider full-service brokerage to involve investment advice for a
fee if a non-bank broker engaged in that activity is considered an
investment adviser under the Investment Advisers Act of
1940.9
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\9\ 15 U.S.C. 80b-1, et seq.
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The OCC also has indicated that certain activities generally will
not entail providing investment advice for a fee. These include
financial advice and counseling, including strategic planning of a
financial nature, merger and acquisition advisory services, advisory
and structuring services related to project finance transactions, and
providing market economic information to customers in general; client-
directed investment activities where the fee does not depend on the
provision of investment advice; investment advice incidental to acting
as a municipal securities dealer; real estate asset management; real
estate consulting; advice concerning bridge loans; services for
homeowners' associations; tax planning and structuring advice; and
investment advice authorized the OCC under 12 U.S.C. 24 (Seventh) as an
incidental power necessary to carry on the business of banking.
OTS agrees with the OCC's interpretation and intends to apply it
when determining whether a Federal savings association is acting as an
``investment adviser.'' OTS invites comment on the OCC interpretation
and whether similar language should be incorporated into the OTS final
rule or guidance.
The OCC, in its December, 1996 revisions to Part 9, considered
relying on State law as an alternative dividing line between fiduciary
and non-fiduciary investment advisory activities. Under a State law
approach, for example, part 550 would apply to an association's
investment advisory activity if that activity, when engaged in by
competing State fiduciaries, would require State authorization and
would be regulated as a fiduciary activity under State law.
While the OCC rejected this approach in its final rule, OTS invites
comment on this and other alternative approaches to defining which
investment advisory activities to include within the definition of
fiduciary capacity.
The adoption of any approach that excludes some types of investment
advisory activities from coverage under part 550 raises the question of
how to oversee ``non-fiduciary'' investment advisory activities. Some
of these activities already are subject to the Interagency Statement on
Retail Sales of Non-deposit Investment Products (February 14,
1994),10 and the anti-fraud provisions of the Securities
Exchange Act of 1934.11 A Federal savings association also
must conduct all its activities, including its investment advisory
activities, in a manner consistent with safe and sound banking
practices.
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\10\ The four Federal banking agencies have issued a
clarification of the Interagency Statement. See Joint Interpretation
of the Interagency Statement on Retail Sales of Nondeposit
Investment Products (Sept. 12, 1995).
\11\ See, e.g., 15 U.S.C. 78i (manipulation of securities
prices), 78j (manipulative and deceptive practices), 78r (liability
for misleading statements), 78z (unlawful representations).
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Finally, OTS notes that employees of banks who engage in certain
securities transactions for customers are subject to various
recordkeeping and confirmation regulations.12 OTS is
considering whether to issue a separate proposed rulemaking adopting
similar rules for employees of savings associations who engage in non-
fiduciary investment advisory services. As such, OTS invites comment on
whether such requirements should be considered in a future rulemaking.
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\12\ 12 CFR Part 12 (OCC); 12 CFR 208.8(k) (FRB); 12 CFR Part
344 (FDIC). These rules are currently being revised by the Federal
banking agencies.
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Fiduciary Officers and Employees
Existing part 550 uses the term ``trust department'' to refer to
the group of employees that are assigned fiduciary responsibilities.
The proposal replaces this term with the term ``fiduciary officers and
employees.'' This proposed change reflects the increasing diffusion of
fiduciary functions throughout a Federal savings association.
Fiduciary Powers
The proposed definition of ``fiduciary powers'' in Sec. 550.2
specifies that the scope of a Federal savings association's fiduciary
powers depends upon the power that the State in which the Federal
savings association is located grants to competing fiduciaries. See 12
U.S.C. 1464(n)(1). This is consistent with the OCC's definition of
fiduciary powers for national banks in new Sec. 9.2(g).
Under OTS's current regulations and past interpretive opinions, a
federal thrift is located, for trust purposes, in each State where it
operates a trust office.13 A trust office may be the
association's home office, any branch office, any agency office, or
alternatively, a fiduciary presence within a State that is the
functional equivalent of operating a brick and mortar trust office--a
so-called de facto trust office.14 Thus, a Federal savings
[[Page 39480]]
association may provide trust services from office located in more than
one State.15
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\13\ 12 CFR 550.2(c)(2); OTS Op. Chief Counsel (June 21, 1996).
\14\ OTS Op. Chief Counsel (March 28, 1996). Conversely, OTS has
found that an association will not be ``located'' in states in which
it only markets its trust services (OTS Op. Chief Counsel (June 21,
1996)), or performs certain activities incidental to serving as a
testamentary trustee or a trustee holding real estate. (OTS Op.
Chief Counsel (August 8, 1996). The interpretive letters reaching
these conclusions were each based on a specific, detailed set of
facts. An institution interested in conducting such operations
should carefully consult those letters and its trust counsel, and
discuss its proposed business plan with the appropriate OTS regional
office.
\15\ OTS Op. Chief Counsel (December 24, 1992). See also 12 CFR
556.5 (authorizing Federal savings association to expand their
branch operations nationwide).
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Investment Discretion
As discussed above, fiduciary capacity would include any capacity
in which the association possesses investment discretion on behalf of
another. With respect to an account, ``investment discretion'' is
defined as the authority ``to determine what securities or other assets
to purchase or sell on behalf of the account.'' This term would apply
whether the investment discretion is sole or shared. Moreover, a
savings association would have investment discretion where it receives
delegated authority over investments and where it delegates this
authority to another.
Proposed Sec. 550.3 (Exempt Activities)
Currently, OTS approval under part 550 is not required for a
Federal savings association to act as trustee or custodian of certain
trusts and accounts. See 12 CFR 545.102. Under this provision, a
savings association may act as a trustee or custodian of an Individual
Retirement Account or a Keogh account, including self directed
accounts. The association may also act as a trustee with no active
fiduciary duties, if applicable law authorizes it to act in that
capacity. Under this provision, however, the association may invest the
funds of the trust or account only: (1) in the association's own
accounts, deposits, obligations or securities, or (2) in such other
assets as the customer may direct, provided that the association does
not exercise any investment discretion or provide any investment advice
with respect to the trust or account assets. Section 545.102 further
requires the Federal savings association to observe principles of sound
trust administration, including those relating to recordkeeping and
segregation of assets, and requires the association to make certain
specific disclosures.
In order to more efficiently organize OTS's fiduciary regulations
and to clarify when applications for fiduciary powers are required, the
proposal would move current 12 CFR 545.102, with slight modifications,
to new Sec. 550.3.
Proposed Sec. 550.4 (Approval Requirements)
Proposed Sec. 550.4 would clarify and streamline the requirements
governing applications for fiduciary powers. The current requirements
are found at Sec. 550.2.
Proposed Sec. 550.5 (Administration of Fiduciary Powers)
Proposed Sec. 550.5 would govern the administration of fiduciary
powers. Paragraph (a) of the proposal would continue to place the
primary responsibility for the proper exercise of a Federal savings
association's fiduciary activities on its board of directors. The board
may continue to assign functions related to the exercise of fiduciary
powers to any director, officer, employee, or to a committee of
directors, officers or employees. Compare existing Sec. 550.5(a)(1).
Paragraph (b) would address the use of personnel and facilities.
Under this provision, a Federal savings association may use its
personnel and facilities to perform services related to the exercise of
its fiduciary powers. Moreover, any department of the association may
use fiduciary officers, employees, and facilities to perform services
unrelated to the exercise of fiduciary powers, to the extent not
prohibited by applicable law. See existing Sec. 550.5(b). The proposed
rule would also permit a Federal savings association to use the
facilities of an affiliate to perform services related to its fiduciary
activities, and allow an affiliate to use fiduciary officers,
employees, and facilities to perform services unrelated to the exercise
of fiduciary powers. Such authority does not, of course, restrict OTS's
ability to impose conditions on a Federal savings association's
relationship with its affiliates.
Proposed Sec. 550.5(c) is a new provision addressing agency
agreements. This provision would clarify that a Federal savings
association may enter into a written agency agreement with another
entity to purchase or sell services related to the exercise of
fiduciary powers. This provision provides Federal savings associations
with greater flexibility and is consistent with recent agency
guidance.16 As with an association's relationships with its
affiliates, this provision does not restrict OTS's ability to impose
conditions on an association's agency agreements. Finally, proposed
paragraph (d) retains the existing requirement that all fiduciary
officers and employees must be adequately bonded. See existing
Sec. 550.5(e).
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\16\ Op. Chief Counsel, Office of Thrift Supervision (November
22, 1995).
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Proposed Sec. 550.6 (General Standards for the Exercise of Fiduciary
Powers)
Proposed Sec. 550.6 sets out general standards that a Federal
savings associations must meet in exercising its fiduciary powers. The
proposal specifies that a Federal savings associations must exercise
its fiduciary powers prudently and in compliance with applicable law.
Proposed Sec. 550.6 further specifies that a Federal savings
association must use standards in exercising its fiduciary powers that
are consistent with safety and soundness, promote sound fiduciary
administration, and enable the association to monitor the conditions of
its fiduciary operations. The standards should also take into account
an association's size, the nature and scope of its fiduciary
operations, and the conditions in the market in which it exercises
fiduciary powers.
In its recent revisions of its fiduciary powers regulation, the OCC
included a provision, 12 CFR 9.5, requiring national banks to maintain
and follow written policies and procedures in certain areas. Several of
those areas, such as brokerage placement practices, the use of material
inside information when buying or selling securities, the selection and
retention of readily available legal counsel, and the investment of
funds held as fiduciary, were drawn from various existing sections of
the OCC's prior fiduciary powers regulation. The new final OCC rule
gathered those separate requirements into one section, and added a
requirement that national banks adopt and follow written policies and
procedures addressing methods for preventing self-dealing and conflicts
of interest.
After consideration, OTS has decided not to specifically require
written policies and procedures in its regulation. Adopting a provision
similar to 12 CFR 9.5 would require Federal savings associations to
adopt and follow written policies and procedures in four areas not
found in current Part 550: brokerage placement services, methods for
preventing self-dealing and conflicts of interest, selection and
retention of readily available legal counsel, and the investment of
funds held as fiduciary. Proposing similar requirements for Federal
savings associations would impose an additional regulatory burden by
expanding the areas in which Federal savings associations must maintain
and follow written policies and procedures.
OTS has opted for a less rigid approach that will still require
associations to exercise their fiduciary
[[Page 39481]]
powers prudently and in compliance with applicable law. We believe this
is consistent with the intent of section 2242 of the Economic Growth
and Regulatory Paperwork Reduction Act of 1996, 110 Stat. 3009-418,
which amended section 303(a) of the CDRIA, 12 U.S.C. 4803(a), by
requiring each Federal banking agency to ``review the extent to which
existing regulations require insured depository institutions . . . to
produce unnecessary internal written policies and eliminate such
requirements, where appropriate.''
The only provision in current Part 550 relating to written policies
and procedures is current Sec. 550.5(c), which requires a Federal
savings association to adopt and follow written policies and procedures
to ensure compliance with the Federal securities laws. That section
further specifies that those policies and procedures should ensure that
fiduciary departments not use material inside information in connection
with the sale or purchase of securities.17
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\17\ The current 12 CFR 9.5 requires that a national bank adopt
and follow written policies and procedures only in preventing the
use of inside information, not the broader requirement in current
Sec. 550.5(c) that those policies and procedures more generally
ensure compliance with the federal securities laws.
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By deleting current Sec. 550.5(c), OTS does not intend to remove
the requirement that Federal savings associations comply with the
Federal securities laws. In this regard, proposed Sec. 550.6 states
that a Federal savings association must exercise its fiduciary powers
``in compliance with applicable law.'' As noted above, the term
``applicable law'' includes all the relevant Federal securities laws.
Federal savings associations may find that adapting written policies
and procedures will enhance their ability to comply with applicable
laws and operate prudently.
Federal savings associations can find additional guidance regarding
standards for the exercise of fiduciary powers in Section 210 of the
Trust Activities Handbook. Section 210 discusses the advantages of
maintaining and following written policies and procedures and provides
illustrative examples of the areas those policies and procedures should
cover. Those examples include conflicts of interest, asset and account
administration, operations, personnel, and business development and
profitability. See Trust Activities Handbook at 97-98.
Proposed Sec. 550.7 (Review of Assets of Fiduciary Accounts)
Currently, Sec. 550.5(a)(2) addresses the review of assets
contained in fiduciary accounts. Proposed Sec. 550.7 incorporates the
requirements of this existing regulation, but reorganizes, clarifies
and streamlines the text.
Under the proposed rule, a Federal savings association must conduct
three types of reviews of fiduciary accounts--a pre-acceptance review,
an initial post-acceptance review, and an annual review. In a pre-
acceptance review, an association must review a prospective account
prior to its acceptance to determine whether the association can
properly administer the account. In the initial post-acceptance review,
an association must conduct a prompt review of all assets of a
fiduciary account for which it has investment discretion to evaluate
whether the assets are appropriate for the account. At least once
during every calendar year thereafter, the association must conduct a
similar review of assets of each fiduciary account for which it has
investment discretion.
Existing Sec. 550.5(a)(2) requires that each annual review must
occur within 15 months of the prior annual review. OTS believes that
this requirement is too rigid, raises timing issues, and may not
contribute to safety and soundness. Accordingly, the OTS proposal does
not retain this requirement.
Proposed Sec. 550.8 (Recordkeeping)
Under proposed Sec. 550.8, a Federal savings association would be
required to maintain adequate records for all fiduciary accounts
(including adequate documentation of the establishment and termination
of each fiduciary account) 18 for all fiduciary accounts for
a specified period, and ensure that fiduciary records are kept separate
and distinct from other records of the association. These requirements
implement section 5(n)(2) of the HOLA and reflect the substance of
existing Secs. 550.5(a)(2) and 550.6.
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\18\ The adequacy of an association's records may be determined
only on a case-by-case basis. Section 5(n)(2) of the HOLA, however,
provides some guidance. It requires the association to maintain a
separate set of books and records ``showing in proper detail all
transactions. . . .''
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Under existing Sec. 550.6, a Federal savings association must
retain fiduciary records ``for such time as to enable the Federal
savings association to furnish such information or reports with respect
thereto as may be required by the [OTS].'' By contrast, the proposed
rule would require an association to retain fiduciary records for three
years from the later of the termination of the account or termination
of litigation relating to the account. OTS believes that the proposed
three-year retention period is easier to apply and understand.
Proposed Sec. 550.9 (Audit of Fiduciary Activities)
Under existing Sec. 550.7, a Federal savings association must
perform a suitable annual audit of its fiduciary operations. Proposed
Sec. 550.9 retains the substance of this section with certain
clarifications of current OTS policy.
Proposed Sec. 550.9(a) requires the association to conduct a
suitable audit of all significant fiduciary activities at least once
during each calendar year and to report the results of the audit
(including all significant actions taken as a result of the audit) in
the minutes of the board of directors. The proposal clarifies that the
audit requirement applies to all significant fiduciary activities.
Thus, an association would not be required to audit de minimis
activities. OTS intends the de minimis standard to apply in very
limited circumstances, such as where an association has only one small
account under a particular fiduciary activity.
Paragraph (b) of the proposed rule clarifies that the required
audit program may be implemented either through an annual or a
continuous audit.19 Under a continuous audit system, the
association may perform discrete audits of specific activities at
intervals appropriate for the nature and risk of that activity. For
example, an association may determine that it is appropriate to audit
certain low-risk fiduciary activities every 18 months. An association
that adopts a continuous audit system must report the results of any
discrete audits performed since the last audit report (including all
actions taken as a result of the audits) in the minutes of the board of
directors at least once during each calendar year.
---------------------------------------------------------------------------
\19\ This change is consistent with current OTS policy. See
Trust Activities Regulatory Handbook (1992) at 142.
---------------------------------------------------------------------------
The proposed audit standards at Sec. 550.9(c) restate the existing
requirements in Sec. 550.7. This paragraph provides that an audit must
ascertain whether the association's internal control policies and
procedures provide reasonable assurance that fiduciary activities are
administered in accordance with applicable law, fiduciary assets are
properly safeguarded, and transactions are accurately recorded in the
appropriate accounts in a timely manner. In addition, proposed
paragraph (c) requires audits to be conducted in accordance with
generally accepted standards for attestation engagements (and other
standards established by OTS). An audit may be conducted by
[[Page 39482]]
external or internal auditors, or other qualified persons who are
responsible only to the association's board of directors.
All audits, whether annual or continuous, must be performed under
the direction of the association's fiduciary audit committee. Under the
proposed rule, the audit committee may consist of a committee of the
association's directors or an audit committee of an affiliate of the
association. By contrast, the current rule does not expressly permit an
audit committee of an affiliate to conduct audits. Compare existing
Sec. 550.7(a).
The proposed change will allow a savings and loan holding company
to audit the fiduciary activities of its subsidiary Federal savings
association through a central audit committee. This will facilitate the
consolidation of functions within a holding company structure. Even
where the audit is performed under the direction of an affiliate's
audit committee, the Federal savings association's board of directors
is still ultimately responsible for the association's fiduciary
activities. See proposed Sec. 550.5(a).
Existing Sec. 550.7(a) requires the audit committee to be
independent of management. The proposal provides guidance regarding the
independence of the audit committee. Specifically, proposed
Sec. 550.9(d) states that the audit committee may not include any
officers of the association or an affiliate who participate
significantly in the administration of the association's fiduciary
activities. Additionally, a majority of the members of the audit
committee may not also be members of a committee to which the board of
directors has delegated power to manage and control the fiduciary
activities of the association.
OTS invites comment on the relationship between the audit
requirement and OTS's fiduciary examination process. In particular,
commenters should address the extent to which OTS examiners should rely
on an association's internal or external fiduciary audits.
Proposed Sec. 550.10 (Fiduciary Funds Awaiting Investment or
Distribution)
Under current Sec. 550.8(a), a Federal savings association may not
allow fiduciary funds to remain uninvested and undistributed any longer
than reasonable for proper account management. Proposed Sec. 550.10(a)
clarifies this requirement in two ways. First, the proposal explicitly
recognizes that applicable law may limit the amount of time that funds
may remain uninvested. Second, it clarifies that the prohibition
applies only to fiduciary accounts over which the association has
investment discretion or discretion over distributions.
With respect to a fiduciary account for which a Federal savings
association has investment discretion, proposed Sec. 550.10(a) requires
the association to obtain a rate of return for funds awaiting
investment or distribution that is consistent with applicable law. This
provision prescribes a uniform policy for the investment of all idle
funds and recognizes the role that applicable law may play in
prescribing standards in this area. Compare existing Sec. 550.8(b)(3)
(funds waiting investment or distribution ``shall be made
productive.'')
Proposed Sec. 550.10(b) addresses self deposits. Like the existing
regulation at Sec. 550.8(b), the proposed rule permits a Federal
savings association to deposit fiduciary funds awaiting investment or
distribution in other departments of the Federal savings association,
unless the deposit is prohibited by applicable law. To the extent that
funds are not FDIC-insured, the association would be required to secure
the deposit with collateral.
Under the existing rule, acceptable collateral includes direct
obligations of the United States, other fully guaranteed obligations of
the United States, readily marketable securities of the classes in
which State-chartered corporate fiduciaries may invest under State law,
and other readily marketable securities as OTS may determine.
The proposal would add two new classes of acceptable collateral for
self-deposits--assets that qualify under State law as appropriate
security for deposits of fiduciary funds and surety bonds unless they
are prohibited by applicable law. OTS believes that a surety bond is
comparable to other forms of security permitted as collateral for self-
deposits. OTS believes that this interpretation will promote the
interests of beneficiaries while ensuring that Federal savings
associations are not disadvantaged in States that permit state-
chartered institutions to secure deposits of idle fiduciary funds with
surety bonds. OTS is considering whether to adopt a uniform national
standard that would allow Federal savings associations to use surety
bonds as collateral, without regard to State prohibitions. OTS invites
public comment on this issue.
The proposed rule includes a new provision at Sec. 550.10(c) which
addresses the deposit of idle fiduciary funds with affiliates. Section
5(n)(3) of the HOLA authorizes a Federal savings association to pledge
assets to secure self deposits of fiduciary funds. This provision,
thus, accommodates an association with a trust department and a savings
department, the organizational structure prevalent in 1980. However,
the statutory language does not address the evolution of Federal
savings association organizational structures in recent years.
Today, some Federal savings associations do not operate departments
that accept deposits of idle fiduciary funds. In some cases, however,
these associations may be affiliated with other depository institutions
that will accept such deposits. Other Federal savings associations
operate as part of a large system of affiliated financial institutions
and wish, for reasons of efficiency, to consolidate their fiduciary
payment and disbursement functions in a single entity.
In these situations, a Federal savings association may wish to
deposit idle fiduciary funds with an affiliated entity.
Consequently, OTS proposes to allow a Federal savings association
to deposit idle fiduciary funds with an affiliate, if not prohibited by
applicable law. A Federal savings association must set aside acceptable
collateral, as described above, as security for a deposit by or with an
affiliate, unless prohibited by applicable law. This change is
consistent with the position taken in OCC's revised part 9, and should
facilitate more efficient fiduciary operations in multi-entity holding
companies.
Proposed Sec. 550.11 (Investment of Fiduciary Funds)
Proposed Sec. 550.11 simply directs a Federal savings association
to invest funds in a fiduciary account in a manner consistent with
applicable law. This section condenses the existing provisions on the
investment of fiduciary funds without any change in substance. Compare
existing Sec. 550.9.
Proposed Sec. 550.12 (Collective Investment Funds)
Proposed Sec. 550.12 governs the establishment and operation of
common trust funds and other collective investment funds by Federal
savings associations. Common trust funds maintained for the investment
and reinvestment of funds held in a fiduciary capacity may be exempted
from taxation under section 584 of the Internal Revenue Code of 1986,
as amended (26 U.S.C. 584). Section 584 requires the funds to meet the
standards for collective investment under the OCC's regulations (12 CFR
9.18), regardless of the identity of the financial institution
fiduciary. Thus, Federal savings associations maintaining section
[[Page 39483]]
584 common trust funds are bound by the OCC regulations.
Accordingly, the proposed rule requires Federal savings
associations to observe the requirements of 12 CFR 9.18 in
administering any common fund. Compare existing Sec. 550.13(b). In its
recent rulemaking, the OCC promulgated various rule changes designed to
lift unnecessary regulatory burdens on institutions that administer
collective investment funds, while preserving appropriate protections
to beneficiaries (and other interested parties). The OTS proposed rule
continues to cross-reference the OCC regulation, as recently amended.
Proposed Sec. 550.13 (Self-dealing and Conflicts of Interest)
Proposed Sec. 550.13 addresses self-dealing and conflicts of
interest. This section retains much of the substance of existing
Sec. 550.10.
Unless authorized by applicable law, proposed Sec. 550.13(a)(1)
would prohibit a Federal savings association from investing funds in
stocks or obligations of, or assets acquired from, the association or
any of its directors, officers or employees; affiliates of the
association or any of their directors, officers or employees; or
individuals or organizations with whom there exists an interest that
might affect the exercise of the best judgment of the association. The
proposed rule would clarify that the general prohibition against self-
dealing and conflicts of interests only applies to those fiduciary
accounts for which the Federal savings association has investment
discretion. Proposed Sec. 550.13(a)(2) specifically sets forth the
conditions under which a Federal savings association may exercise the
right to purchase additional stock or fractional shares of stock.
Proposed Sec. 550.13(b) restates the existing prohibitions against
loans, sales or other transfers from fiduciary accounts. See existing
Sec. 550.10(b). Under the proposal, a Federal savings association may
not lend, sell, or otherwise transfer assets held in a fiduciary
account for which the association has investment discretion to the
association or any of its directors, officers, or employees; to
affiliates of the association or any of their directors, officers, or
employees; or to individuals or organizations with whom there exists an
interest that might affect the exercise of the best judgment of the
association. Proposed Sec. 550.13(b)(1)(i) through (iv) retain the
existing exceptions to this general prohibition, with one
clarification. Section 5(n)(7) of the HOLA prohibits a Federal savings
association from lending funds held in fiduciary accounts to its
directors, officers, or employees. For ease of reference, proposed
Sec. 550.13(b)(2) restates this statutory prohibition.20
---------------------------------------------------------------------------
\20\ The proposed rule permits an association to make these
loans with respect to employee benefit plans in accordance with the
exemptions found at section 408 of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1108). Section 408 specifically
authorizes loans to participants and beneficiaries of such plans
under certain circumstances. Under these exemptions, the association
may make loans to directors, officers, or employees that are
participants or beneficiaries in the association's own ERISA plan or
in ERISA plans that the association administers for other employers.
---------------------------------------------------------------------------
Finally, consistent with current Sec. 550.10(d), the proposed rule
would permit a Federal savings association to make loans to fiduciary
accounts, sell assets between fiduciary accounts and make loans between
fiduciary accounts. See proposed Secs. 550.13(c), (d) and (e). Such
loans and sales would be permitted if the transactions are fair to the
fiduciary accounts and are not prohibited by applicable law.
Proposed Sec. 550.14 (Custody of Fiduciary Funds)
Proposed Sec. 550.14 retains the substance of existing Sec. 550.11,
which addresses custody of fiduciary assets. The proposal continues to
require the association to place assets of fiduciary accounts in the
joint custody or control of not fewer than two fiduciary officers or
employees. The proposal also continues to allow a Federal savings
association to maintain fiduciary assets off-premises, if consistent
with applicable law. Consistent with section 5(n)(2) of the HOLA, a
Federal savings association must keep fiduciary assets separate from
the assets of the association. Further, the proposed rule would require
the association to keep assets in each fiduciary account separate from
all other accounts or to identify the investments as the property of a
particular account (except when assets are invested in collective
investment funds).
Proposed Sec. 550.15 (Deposit of Securities With State Authorities)
Under section 5(n)(5) of the HOLA and current Sec. 550.4, whenever
local law requires corporations acting as fiduciaries to deposit
securities with State authorities for the protection of trust accounts,
a Federal savings association must make a similar deposit before it can
act in a fiduciary capacity.21 Proposed Sec. 550.15 restates
this general requirement with two clarifications.
---------------------------------------------------------------------------
\21\ 12 U.S.C. 1464(n)(5).
---------------------------------------------------------------------------
First, the proposed rule would require a deposit only if the laws
of the state in which the Federal savings association is located
require the deposit.22 In addition, the current rule does
not address how to calculate the required deposit when an association
administers trust assets from offices located in more than one State.
The current rule is unclear whether the association must compute the
deposit based on the amount of trust assets held in the State or the
amount of all trust assets.
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\22\ See Op. Chief Counsel, Office of Thrift Supervision
(December 24, 1992) (concluding that a Federal savings association
should compute the amount of a required State deposit based on the
amount of trust assets administered from offices located in that
State, rather than on the amount of its nationwide trust assets).
---------------------------------------------------------------------------
Consistent with current agency guidance, the proposed rule does not
require a Federal savings association with multi-state trust operations
to compute the State deposit based on its nationwide trust assets. To
do so would go far beyond the deposit requirement's purpose of
protecting trust assets in a particular State, and would unnecessarily
burden an association with multi-state fiduciary
operations.23 Accordingly, the proposed rule would permit a
Federal savings association to calculate the deposit requirement in
each State based on the amount of trust assets administered primarily
from offices located in that State.
---------------------------------------------------------------------------
\23\ Id.
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Proposed Sec. 550.16 (Fiduciary Compensation)
Proposed Sec. 550.16 retains the substance of current Sec. 550.12,
which addresses fiduciary compensation. Under the proposal, a Federal
savings association may charge a reasonable fee for its fiduciary
services if the amount of the compensation is not set or governed by
applicable law. The proposal further prohibits an officer or an
employee of a Federal savings association from retaining any
compensation for acting as a co-fiduciary with the association in the
administration of a fiduciary account, except with the specific
approval of the board of directors. Finally, the proposal prohibits a
Federal savings association from permitting a fiduciary officer or
employee from accepting a bequest or gift of trust assets, unless the
bequest or gift is directed or made by a relative of the officer or
employee or is specifically approved by the association's board of
directors.
Proposed Sec. 550.17 (Receivership or Voluntary Liquidation)
The proposal retains the substance of current Sec. 550.15, which
addresses receivership and voluntary liquidation.
[[Page 39484]]
Proposed Sec. 550.17 directs a receiver, conservator, or liquidating
agent of a Federal savings association to promptly close, or transfer
to a substitute fiduciary, all fiduciary accounts, in accordance with
OTS instructions and the orders of the court having jurisdiction.
Proposed Sec. 550.18 (Surrender of Fiduciary Powers)
Proposed Sec. 550.18 sets forth the procedures that apply when a
Federal savings association seeks to surrender its fiduciary powers.
Specifically, paragraph (a) requires a Federal savings association to
file a certified copy of a resolution of its board of directors
evidencing its intent to surrender its fiduciary powers. If, after an
appropriate investigation, the Regional Director is satisfied that the
Federal savings association has been discharged from all fiduciary
duties, the Regional Director will notify the association that it is no
longer authorized to exercise its fiduciary powers. See proposed
Sec. 550.18(b). The proposal incorporates the OTS practice of providing
a written notice rather than a certificate that the association is no
longer authorized to exercise trust powers. Compare existing
Sec. 550.14(b).
Existing Sec. 550.14 states that upon surrender of fiduciary
powers, a Federal savings association is no longer subject to part 550,
cannot exercise fiduciary powers, and is entitled to return of any
deposit with State authorities. Except for the return of the State
deposit, OTS believes that these provisions are self-evident and
unnecessary. Accordingly, the proposed rule does not include these
provisions.
Proposed Sec. 550.19 (Revocation of Fiduciary Powers)
Proposed Sec. 550.19 sets forth standards and procedures for the
revocation of fiduciary powers. This section retains the standards
currently set forth in existing Sec. 550.16(a), pursuant to which OTS
may revoke fiduciary powers if the association has unlawfully or
unsoundly exercised its fiduciary powers, has failed to exercise its
fiduciary powers for five consecutive years, or has otherwise failed to
comply with part 550.
Existing Sec. 550.16(b) details the procedural requirements
governing the revocation of fiduciary powers. This rule generally
repeats the statutory requirements for a hearing contained in the HOLA.
Because the requirements are already set out in the statute, proposed
Sec. 550.19(b) simply states that OTS revocation procedures are set
forth at 12 U.S.C. 1464(n)(10) and that the hearing required under 12
U.S.C. 1464(n)(10)(B) will be conducted in accordance with 12 CFR Part
509 (OTS regulations governing administrative hearings).
III. Miscellaneous Fiduciary Powers Provisions
Consolidation or Merger
In its recent rulemaking, the OCC deleted, without discussion, its
regulation dealing with the consolidation or merger of two or more
national banks. OTS's regulation dealing with that situation is
currently found at Sec. 550.3. This provision states that when two or
more Federal savings associations merge, and one of those associations
is authorized to exercise fiduciary powers, the resulting association
is also authorized to exercise fiduciary powers. No new application to
exercise those powers is necessary. OTS believes that this proposition
is self-evident and not likely to be the subject of dispute.
Accordingly, the proposal does not contain a provision that corresponds
to existing Sec. 550.3.
Transfer Agents
Also in its recent rulemaking, the OCC adopted Sec. 9.20, which
specified that the rules adopted by the Securities and Exchange
Commission (SEC) under section 17A of the Securities and Exchange Act
of 1934 (1934 Act) (15 U.S.C. 78q-1, et seq.) apply to the domestic
activities of national bank transfer agents. Those rules are found at
17 CFR 240.17Ac2-2 and 240.17Ad-1 through 16.
Section 17A(c) of the 1934 Act (15 U.S.C. 78q-1(c)) provides, inter
alia, that transfer agents must register with their appropriate
regulatory agencies. Under section 3(a)(34)(B) of the 1934 Act (15
U.S.C. 78c-3), the appropriate regulatory agency for banks is the OCC,
the Board of Governors of the Federal Reserve Board, or the Federal
Deposit Insurance Corporation.
The appropriate regulator for Federal savings association transfer
agents, however, has always been the SEC. Thus, Federal savings
association transfer agents are already subject to the SEC rules
adopted under section 17A of the 1934 Act. Consequently, while a
transfer agent is within the definition of fiduciary capacity for
Federal savings associations, review of compliance with the SEC's
registration and associated transfer agent rules and regulations lies
with the SEC. Accordingly, the proposal does not include a provision
that corresponds to Sec. 9.20.
IV. Community Reinvestment Act Revisions
OTS also proposes to revise its regulations implementing the
Community Reinvestment Act (CRA), located at 12 CFR Part 563e.
Specifically, OTS proposes to amend Sec. 563e.11(c), which outlines the
scope of the CRA regulations.
Existing Sec. 563e.11(c) provides that the CRA regulations apply to
``all savings associations as defined in * * * this chapter.'' By
contrast, the CRA regulations of the other banking agencies exempt
institutions that do not perform commercial or retail banking
services.24 These institutions, including trust companies,
are not in the business of providing commercial or retail banking
services by extending credit to the public in the ordinary course of
business. Accordingly, they are not subject to CRA requirements.
---------------------------------------------------------------------------
\24\ See 12 CFR 25.11(c) (OCC); 12 CFR 228.11(c) (FRB); 12 CFR
345.11(c) (FDIC).
---------------------------------------------------------------------------
Because there were no such institutions chartered as savings
associations when Sec. 563e.11(c) was adopted, OTS did not exclude them
from the scope of the CRA regulations. Recently, however, some savings
and loan holding companies have acquired or created savings
associations that operate solely as trust companies, or that otherwise
do not provide commercial or retail banking services by extending
credit to the general public in the ordinary course of business. OTS
anticipates that there may be similar institutions chartered in the
future.
Accordingly, OTS proposes to amend Sec. 563e.11(c) to clarify that
part 563e is not intended to apply to savings associations that do not
perform commercial or retail banking services by granting credit to the
public in the ordinary course of business, other than as incident to
their specialized operations. The proposal includes several examples of
such institutions, such as trust companies, clearing agents,
correspondent associations, and companies that provide cash management
controlled disbursement services.
V. Disposition of Existing Regulations
The following chart gives of an overview of the changes made to
part 550.
[[Page 39485]]
----------------------------------------------------------------------------------------------------------------
Revised provision Former provision Comments
----------------------------------------------------------------------------------------------------------------
Sec. 550.1.......................... ............................. Added.
Sec. 550.2..........................
Affiliate............................ ............................. Added.
Applicable law....................... Sec. 550.1(g)............... Significantly modified.
Custodian under a uniform gifts to Sec. 550.1(b)............... Modified.
minors act.
Fiduciary account.................... Sec. 550.1(a)............... Modified.
Fiduciary capacity................... Sec. 550.1(c) and (h)....... Significantly modified.
Fiduciary officers and employees..... Sec. 550.1(j)............... Modified.
Fiduciary powers..................... Sec. 550.1(k)............... Modified.
Guardian............................. Sec. 550.1(e)............... Modified.
Sec. 550.3.......................... Sec. 545.102................ Modified and added.
Sec. 550.4.......................... Sec. 550.2.................. Modified.
Sec. 550.5.......................... Sec. 550.5(a)(1), (b) and Significantly modified.
(e).
Sec. 550.6.......................... ............................. Added.
Sec. 550.7.......................... Sec. 550.5(a)(2)............ Significantly modified.
Sec. 550.8.......................... Secs. 550.5(a)(2) and 550.6. Significantly modified.
Sec. 550.9.......................... Sec. 550.7.................. Significantly modified.
Sec. 550.10......................... Sec. 550.8.................. Significantly modified.
Sec. 550.11......................... Sec. 550.9.................. Significantly modified.
Sec. 550.12......................... Sec. 550.13................. Modified.
Sec. 550.13......................... Sec. 550.10................. Modified.
Sec. 550.14......................... Sec. 550.11................. Modified.
Sec. 550.15......................... Sec. 550.4.................. Significantly modified.
Sec. 550.16......................... Sec. 550.12................. Modified.
Sec. 550.17......................... Sec. 550.15................. Modified.
Sec. 550.18......................... Sec. 550.14................. Modified.
Sec. 550.19......................... Sec. 550.16................. Modified.
----------------------------------------------------------------------------------------------------------------
VI. Reporting and Recordkeeping Requirements
OTS invites comment on:
Whether the proposed information collection contained in this
proposal is necessary for the proper performance of OTS's functions,
including whether the information has practical utility;
(1) The accuracy of OTS's estimate of the burden of the proposed
information collection;
(2) Ways to enhance the quality, utility, and clarity of the
information to be collected;
(3) Ways to minimize the burden of the information collection on
respondents, including through the use of automated collection
techniques or other forms of information technology; and
(4) Estimates of capital and start-up costs of operation,
maintenance and purchases of services to provide information.
Respondents/recordkeepers are not required to respond to this
collection of information unless it displays a currently valid OMB
control number.
The collection of information requirements contained in this
proposal have been submitted to the Office of Management and Budget for
review in accordance with the Paperwork Reduction Act of 1995 (44
U.S.C. 3507(d)). Comments on the collections of information should be
sent to the Office of Management and Budget, Paperwork Reduction
Project (1550-0037), Washington, DC 20503, with copies to the
Regulations and Legislation Division (1550-0037), Chief Counsel's
Office, Office of Thrift Supervision, 1700 G Street, NW., Washington,
DC 20552.
The collection of information requirements in this proposed rule
are found in 12 CFR 550.2, 550.8, 550.9, 550.12 and 550.18. OTS
requires this information for the proper supervision of Federal savings
associations' fiduciary activities. The likely respondents/
recordkeepers are Federal savings associations.
Estimated average annual burden hours per respondent/recordkeeper: 10.5
Estimated number of respondents:
Applications for fiduciary powers: 13
Documentation and audit of fiduciary activities: 75
Surrender of fiduciary powers: 1
Estimated total annual reporting and recordkeeping burden: 155.5
Start up costs to respondents: 0
VII. Executive Order 12866
The Director of OTS has determined that this proposed rule does not
constitute a ``significant regulatory action'' for the purposes of
Executive Order 12866.
VIII. Unfunded Mandates Reform Act of 1995
Section 202 of the Unfunded Mandates Reform Act of 1995, Pub. L.
104-4 (Unfunded Mandates Act), requires that an agency prepare a
budgetary impact statement before promulgating a rule includes a
Federal mandate that may result in expenditure by State, local, and
tribal governments, in the aggregate, or by the private sector, of $100
million or more in any one year. If a budgetary impact statement is
required, Section 205 of the Unfunded Mandates Act also requires an
agency to identify and consider a reasonable number of regulatory
alternatives before promulgating a rule. OTS has determined that the
proposed rule will not result in expenditures by State, local, or
tribal governments or by the private sector of $100 million or more.
Accordingly, a budgetary impact statement is not required under section
202 of the Unfunded Mandates Act of 1995.
IX. Regulatory Flexibility Act Analysis
Pursuant to section 605(b) of the Regulatory Flexibility Act, OTS
certifies that this proposed rule will not have a significant economic
impact on a substantial number of small entities. The proposal
liberalizes requirements and reduces burdens for Federal savings
associations that exercise fiduciary powers, regardless of size.
Accordingly, a regulatory flexibility analysis is not required.
List of Subjects
12 CFR Part 545
Accounting, Consumer Protection, Credit, Electronic funds
transfers, Investments, Reporting and recordkeeping requirements,
Savings associations.
[[Page 39486]]
12 CFR Part 550
Accounting, Reporting and recordkeeping requirements, Savings
associations, Trusts and trustees.
12 CFR Part 563e
Community development, Credit, Investments, Reporting and
recordkeeping requirements, Savings associations.
Authority and Issuance
Accordingly, the Office of Thrift Supervision proposes to amend
chapter V, title 12, Code of Federal Regulations, as set forth below.
PART 545--OPERATIONS
1. The authority citation for part 545 continues to read as
follows:
Authority: 12 U.S.C. 1462a, 1463, 1464, 1828.
Sec. 545.102 [Removed]
2. Section 545.102 is removed.
3. Part 550 is revised to read as follows:
PART 550--FIDUCIARY POWERS OF FEDERAL SAVINGS ASSOCIATIONS
Sec.
550.1 Authority and scope.
550.2 Definitions.
550.3 Exempt activities.
550.4 Approval requirements.
550.5 Administration of fiduciary powers.
550.6 General standards for the exercise of fiduciary powers.
550.7 Review of assets of fiduciary accounts.
550.8 Recordkeeping.
550.9 Audit of fiduciary activities.
550.10 Fiduciary funds awaiting investment or distribution.
550.11 Investment of fiduciary funds.
550.12 Collective investment funds.
550.13 Self-dealing and conflict of interest.
550.14 Custody of fiduciary funds.
550.15 Deposit of securities with State authorities.
550.16 Fiduciary compensation.
550.17 Receivership or voluntary liquidation.
550.18 Surrender of fiduciary powers.
550.19 Revocation of fiduciary powers.
Authority: 12 U.S.C. 1462a, 1463, 1464.
Sec. 550.1 Authority and scope.
This part is issued pursuant to 12 U.S.C. 1464(n). It sets forth
the standards that apply to the fiduciary activities of Federal savings
associations.
Sec. 550.2 Definitions.
For the purposes of this part:
Affiliate has the same meaning as in 12 U.S.C. 221a(b).
Applicable law means the law of a State or other jurisdiction
governing a Federal savings association's fiduciary relationships, any
applicable Federal law governing those relationships, the terms of the
instrument governing a fiduciary relationship, or any court order
pertaining to the relationship.
Custodian under a uniform gifts to minors act means a fiduciary
relationship established pursuant to a State law substantially similar
to the Uniform Gifts to Minors Act or the Uniform Transfers to Minors
Act as published by the American Law Institute.
Fiduciary account means an account administered by a Federal
savings association acting in a fiduciary capacity.
Fiduciary capacity means acting as a trustee, executor,
administrator, registrar of stocks and bonds, transfer agent, guardian,
assignee, receiver, or custodian under a uniform gifts to minors act;
investment adviser, if the Federal savings association receives a fee
for its investment advice; any capacity in which the Federal savings
association possesses investment discretion on behalf of another; or
any other similar capacity that OTS authorizes under 12 U.S.C. 1464(n).
Fiduciary officers and employees means all officers and employees
of a Federal savings association to whom the board of directors or its
designee has assigned functions involving the exercise of the
association's fiduciary
Fiduciary powers means the authority that the OTS permits a Federal
savings association to exercise pursuant to 12 U.S.C. 1464(n). The
scope of the Federal savings association's fiduciary powers depends
upon the powers that the State grants to competing fiduciaries in the
State in which the Federal savings association is located.
Guardian means the guardian or conservator, by whatever name used
by State law, of the estate of a minor, an incompetent person, an
absent person, or a person over whose estate a court has taken
jurisdiction, other than under bankruptcy or insolvency laws.
Investment discretion means, with respect to an account, the sole
or shared authority (whether or not that authority is exercised) to
determine what securities or other assets to purchase or sell on behalf
of that account. A savings association that delegates its authority
over investments or a savings association that receives delegated
authority over investments are both deemed to have investment
discretion.
Sec. 550.3 Exempt activities.
(a) Activities exempted. A Federal savings association is not
subject to this part if it acts solely in the following fiduciary
capacities:
(1) Trustee of a trust created or organized in the United States
and forming part of a stock bonus, pension, or profit-sharing plan
qualifying for specific tax treatment under section 401(d) of the
Internal Revenue Code of 1954 (26 U.S.C. 401(d));
(2) Trustee or custodian of a Individual Retirement Account within
the meaning of section 408(a) of the Internal Revenue Code (26 U.S.C.
408(a)); or
(3) Trustee of a fiduciary account that involves no active
fiduciary duties provided that the applicable law authorizes the
savings association to act in this capacity.
(b) Investment authority. A Federal savings association acting in
the fiduciary capacities listed in paragraph (a) of this section may
invest the funds of the fiduciary account solely in the following
instruments:
(1) The Federal savings association's accounts, deposits,
obligations or securities; and
(2) Such other assets as the customer may direct, provided the
Federal savings association does not exercise any investment discretion
and does not directly or indirectly provide any investment advice with
respect to the fiduciary account.
(c) Administration. A Federal savings association acting in the
fiduciary capacities described in paragraph (a) of this section must
observe principles of sound fiduciary administration, including those
related to recordkeeping and segregation of assets.
(d) Compensation. A Federal savings association may receive
reasonable compensation for acting in any fiduciary capacity authorized
by this section.
(e) Disclosure. Unless fiduciary investments are limited to
accounts or deposits insured by the FDIC, a Federal savings association
acting in the capacities described in paragraph (a) of this section
must include the following language in bold type on the first page of
any contract documents:
Funds invested pursuant to this agreement are not insured by the
Federal Deposit Insurance Corporation (``FDIC'') merely because the
trustee or custodian is a Federal savings association the accounts
of which are covered by such insurance. Only investments in the
accounts of such a Federal savings association are insured by the
FDIC, subject to its rules and regulations.
Sec. 550.4 Approval requirements.
(a) OTS approval required. A Federal savings association may not
exercise fiduciary powers unless it obtains prior approval from the OTS
under this
[[Page 39487]]
section. A Federal savings association may exercise only those
fiduciary powers specified in the OTS approval. Unless otherwise
provided in the approval, a Federal savings association may exercise
fiduciary powers only from those offices listed in the application.
(b) Application requirements. A Federal savings association must
file an application under Sec. 516.1(c) of this chapter in order to
exercise fiduciary powers through fiduciary officers and employees or
through an affiliate. The application must describe the fiduciary
powers that the Federal savings association or affiliate will exercise
and include the additional information necessary to enable the OTS to
make the determinations under paragraph (c) of this section.
(c) Factors considered. In reviewing an application filed under
paragraph (b) of this section, the OTS will consider:
(1) The Federal savings association's financial condition;
(2) The Federal savings association's capital, and whether that
capital is sufficient under the circumstances;
(3) The Federal savings association's overall performance;
(4) The fiduciary powers the Federal savings association proposes
to exercise;
(5) Its proposed supervision of those powers;
(6) The availability of legal counsel;
(7) The needs of the community to be served; and
(8) Any other facts or circumstances that the OTS considers proper.
(d) OTS action. The Director may approve or disapprove any
application filed under this section. The Regional Director is
specifically authorized to approve or disapprove any application filed
under this section that does not raise any significant issues of law or
policy on which the OTS has not taken a formal position.
(e) Conditions of approval. The OTS may impose appropriate
conditions to its approval of the application to ensure that the
requirements of this part are met, or it may deny the application.
Sec. 550.5 Administration of fiduciary powers.
(a) Responsibilities of the board of directors. A Federal savings
association's fiduciary activities must be managed by or under the
direction of its board of directors. In discharging its
responsibilities, the board may assign any function related to the
exercise of fiduciary powers to any director, officer, employee, or
committee of directors, officers or employees.
(b) Use of personnel and facilities. The Federal savings
association may use any qualified personnel and facilities of the
association or its affiliates to perform services related to the
exercise of its fiduciary powers. Any department of the association or
its affiliates may use fiduciary officers, employees, and facilities to
perform services unrelated to the exercise of fiduciary powers, to the
extent not prohibited by applicable law.
(c) Agency agreements. Pursuant to a written agreement, a Federal
savings association exercising fiduciary powers may perform services
related to the exercise of fiduciary powers for another association or
other entity, and may purchase services related to the exercise of
fiduciary powers from another association or other entity.
(d) Bond requirement. A Federal savings association must ensure
that all fiduciary officers and employees are adequately bonded.
Sec. 550.6 General standards for the exercise of fiduciary powers.
Each Federal savings association must exercise its fiduciary powers
prudently and in compliance with applicable law. Each Federal savings
association must use standards in exercising its fiduciary powers that
are consistent with safety and soundness, promote sound fiduciary
administration, and enable the Federal savings association to
adequately monitor the condition of its fiduciary operations. The
standards should be appropriate for the size and condition of the
Federal savings association, the nature and scope of its fiduciary
operations, and the conditions in the market in which it exercises
fiduciary powers.
Sec. 550.7 Review of assets of fiduciary accounts.
(a) Pre-acceptance review. Before accepting a fiduciary account, a
Federal savings association must review the prospective account to
determine whether it can properly administer the account.
(b) Initial post-acceptance review. Upon the acceptance of a
fiduciary account for which a Federal savings association has
investment discretion, the association must conduct a prompt review of
all assets of the account to evaluate whether they are appropriate for
the account.
(c) Annual review. At least once during every calendar year, a
Federal savings association must conduct a review of all assets of each
fiduciary account for which the association has investment discretion
to evaluate whether they are appropriate, individually and
collectively, for the account.
Sec. 550.8 Recordkeeping.
(a) Documentation of accounts. A Federal savings association must
maintain adequate records for all fiduciary accounts. Adequate records
include, but are not limited to, documentation of the establishment and
termination of each fiduciary account.
(b) Retention of records. A Federal savings association must retain
the records described in paragraph (a) of this section for a period of
three years from the later of the termination of the account or the
termination of any litigation relating to the account.
(c) Separation of records. A Federal savings association must
ensure that the records described in paragraph (a) of this section are
separate and distinct from other records of the association.
Sec. 550.9 Audit of fiduciary activities.
(a) Annual audit. At least once during each calendar year, a
Federal savings association must arrange for a suitable audit of all
significant fiduciary activities, under the direction of its fiduciary
audit committee, unless the association adopts a continuous audit
system in accordance with paragraph (b) of this section. The
association must note the results of the audit (including significant
actions taken as a result of the audit) in the minutes of the board of
directors.
(b) Continuous audit. In lieu of performing annual audits under
paragraph (a) of this section, a Federal savings association may adopt
a continuous audit system under which the association arranges for a
discrete audit of each significant fiduciary activity (i.e., on an
activity-by-activity basis), under the direction of its fiduciary audit
committee, at an interval commensurate with the nature and risk of that
activity. Certain fiduciary activities may receive audits at intervals
greater or less than one year, as appropriate. An association that
adopts a continuous audit system must note the results of all discrete
audits performed since the last audit report (including significant
actions taken as a result of the audits) in the minutes of the board of
directors at least once during each calendar year.
(c) Audit standards. (1) An audit must ascertain whether the
association's internal control policies and procedures provide
reasonable assurance that:
(i) Fiduciary activities are administered in accordance with
applicable law;
(ii) Fiduciary assets are properly safeguarded; and
(iii) Transactions are accurately recorded in appropriate accounts
in a timely manner.
[[Page 39488]]
(2) An audit must be conducted in accordance with generally
accepted standards for attestation engagements and other standards
established by the OTS.
(3) An audit may be conducted by internal auditors, external
auditors or other qualified persons who are responsible only to the
board of directors.
(d) Fiduciary audit committee. A Federal savings association's
fiduciary audit committee must consist of a committee of the
association's directors or an audit committee of an affiliate of the
association. The committee:
(1) May not include any officers of the association or an affiliate
who participate significantly in the administration of the
association's fiduciary activities; and
(2) Must consist of a majority of members who are not members of
any committee to which the board of directors has delegated power to
manage and control the fiduciary activities of the association.
Sec. 550.10 Fiduciary funds awaiting investment or distribution.
(a) In general. With respect to a fiduciary account for which a
Federal savings association has investment discretion or discretion
over distributions, the association may not allow funds awaiting
investment or distribution to remain uninvested and undistributed any
longer than is reasonable for the proper management of the account and
consistent with applicable law. With respect to a fiduciary account for
which a Federal savings association has investment discretion, the
association must obtain for funds awaiting investment or distribution a
rate of return that is consistent with applicable law.
(b) Self-deposits--(1) In general. A Federal savings association
may deposit funds of a fiduciary account that are awaiting investment
or distribution in the commercial, savings, or another department of
the association, unless prohibited by applicable law. To the extent
that the funds are not insured by the FDIC, the association must set
aside collateral as security, under the control of appropriate
fiduciary officers and employees, in accordance with paragraph (b)(2)
of this section. The market value of the collateral set aside must at
all times equal or exceed the amount of the uninsured fiduciary funds.
(2) Acceptable collateral. A Federal savings association may
satisfy the collateral requirement of paragraph (b)(1) of this section
with any of the following:
(i) Direct obligations of the United States, or other obligations
fully guaranteed by the United States as to principal and interest;
(ii) Readily marketable securities of the classes in which State-
chartered corporate fiduciaries are permitted to invest fiduciary funds
under applicable state law;
(iii) Other readily marketable securities as the OTS may determine;
(iv) Surety bonds, to the extent they provide adequate security,
unless prohibited by applicable law; and
(v) Any other assets that qualify under applicable State law as
appropriate security for deposits of fiduciary funds.
(c) Affiliate deposits. A Federal savings association, acting in
its fiduciary capacity, may deposit funds of a fiduciary account that
are awaiting investment or distribution with an affiliated insured
depository institution, unless prohibited by applicable law. A Federal
savings association must set aside collateral consistent with the
requirements of paragraph (b)(2) of this section, as security for a
deposit by or with an affiliate of fiduciary funds awaiting investment
or distribution, unless prohibited by applicable law.
Sec. 550.11 Investment of fiduciary funds.
A Federal savings association must invest funds of a fiduciary
account in a manner consistent with applicable law.
Sec. 550.12 Collective investment funds.
(a) In general. Where consistent with applicable law, a Federal
savings association may invest assets that it holds as fiduciary in the
following collective investment funds:1
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\1\ In determining whether investing fiduciary assets in a
collective investment fund is proper, the Federal savings
association may consider the fund as a whole and, for example, shall
not be prohibited from making that investment because any particular
asset is non-income producing.
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(1) A fund maintained by the association, or by one or more
affiliated depository institutions 2 exclusively for the
collective investment and reinvestment of money contributed to the fund
by the association, or by one or more affiliated depository
institutions, in its capacity as trustee, executor, administrator,
guardian, or custodian under a uniform gifts to minors act.
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\2\ A fund established pursuant to this paragraph (a)(1) that
includes money contributed by entities that are affiliates as
defined in Sec. 550.2, but are not members of the same affiliated
group as defined at 26 U.S.C. 1504, may fail to qualify for tax-
exempt status under the Internal Revenue Code. See 26 U.S.C. 584.
---------------------------------------------------------------------------
(2) A fund consisting solely of assets of retirement, pension,
profit sharing, stock bonus, or other trusts that are exempt from
Federal income tax.
(i) A Federal savings association may invest assets of retirement,
pension, profit sharing, stock bonus or other trusts that are exempt
from Federal income tax and that the association holds in its capacity
as trustee in a collective investment fund established under paragraph
(a)(1) or (a)(2) of this section.
(ii) A Federal savings association may invest assets of retirement,
pension, profit sharing, stock bonus, or other employee benefit trusts
that are exempt from Federal income tax and that the association holds
in any capacity (including agent), in a collective investment fund
established under this paragraph (a)(2) if the fund itself qualifies
for exemption from Federal income tax.
(3) Other collective investments authorized for national banks
under 12 CFR 9.18.
(b) Requirements. Collective investment funds held by a Federal
savings association under paragraph (a) of this section must be
administered in accordance with 12 CFR 9.18. Any document required to
be filed with the Comptroller of the Currency under 12 CFR 9.18 must
also be filed with the OTS in accordance with the filing instructions
in Sec. 516.1(c) of this chapter. The OTS may review such documents for
compliance with this part and other laws and regulations.
Sec. 550.13 Self-dealing and conflict of interest.
(a) Investments for fiduciary accounts--(1) In general. Unless
authorized by applicable law, a Federal savings association may not
invest funds of a fiduciary account for which an association has
investment discretion in the stock or obligations of, or in assets
acquired from the association or any of its directors, officers, or
employees; affiliates of the association or any of their directors,
officers, or employees; or individuals or organizations with whom there
exists an interest that might affect the exercise of the best judgment
of the association.
(2) Additional securities investments. If retention of stock or
obligations of the association or its affiliates is consistent with
applicable law, the association may:
(i) Exercise rights to purchase additional stock (or securities
convertible into additional stock) when offered pro rata to
stockholders; and
(ii) Purchase fractional shares to complement fractional shares
acquired through the exercise of rights or the receipt of a stock
dividend resulting in fractional share holdings.
[[Page 39489]]
(b) Loans, sales, or other transfers from fiduciary accounts--(1)
In general. A Federal savings association may not lend, sell, or
otherwise transfer assets of a fiduciary account for which the
association has investment discretion to the association or any of its
directors, officers, or employees, or to affiliates of the association
or any of their directors, officers, or employees, or to individuals or
organizations with whom there exists an interest that might affect the
exercise of the best judgment of the association, unless:
(i) The transaction is authorized by applicable law;
(ii) Legal counsel advises the association in writing that the
association has incurred, in its fiduciary capacity, a contingent or
potential liability, in which case the association, upon the sale or
transfer of assets, must reimburse the fiduciary account in cash at the
greater of book or market value of the assets;
(iii) As provided in 12 CFR 9.18 for defaulted fixed-income
investments; or
(iv) Required in writing by the OTS.
(2) Loans of funds held in trust. Notwithstanding paragraph (b)(1)
of this section, a Federal savings association may not lend to any of
its directors, officers, or employees any funds held in trust, except
with respect to employee benefit plans in accordance with the
exemptions found at section 408 of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1108).
(c) Loans to fiduciary accounts. A Federal savings association may
make a loan to a fiduciary account and may hold a security interest in
assets of the account if the transaction is fair to the account and is
not prohibited by applicable law.
(d) Sales between fiduciary accounts. A Federal savings association
may sell assets between any of its fiduciary accounts if the
transaction is fair to both accounts and is not prohibited by
applicable law.
(e) Loans between fiduciary accounts. A Federal savings association
may make a loan between any of its fiduciary accounts if the
transaction is fair to both accounts and is not prohibited by
applicable law.
Sec. 550.14 Custody of fiduciary funds.
(a) Control of fiduciary assets. A Federal savings association must
place assets of fiduciary accounts in the joint custody or control of
not fewer than two of the fiduciary officers or employees designated
for that purpose by the board of directors. A Federal savings
association may maintain the investments of a fiduciary account off-
premises, if consistent with applicable law and if the association
maintains adequate safeguards and controls.
(b) Separation of fiduciary assets. A Federal savings association
must keep the assets of fiduciary accounts separate from the assets of
the association. A Federal savings association must keep the assets of
each fiduciary account separate from all other accounts or must
identify the investments as the property of a particular account,
except as provided in Sec. 550.12.
Sec. 550.15 Deposit of securities with State authorities.
(a) In general. If the law of the State in which the Federal
savings association is located requires corporations acting in a
fiduciary capacity to deposit securities with State authorities for the
protection of private or court trusts, then a Federal savings
association that acts as a private or court-appointed trustee must make
such a deposit with that State. If the State authorities refuse to
accept the deposit, the association must deposit the securities with
the Federal Home Loan Bank of which the Federal savings association is
a member, to be held for the protection of private or court trusts to
the same extent as if the securities had been deposited with State
authorities.
(b) Assets held in more than one State. If a Federal savings
association administers trust assets in more than one State, the
association may compute the amount of deposit required for each State
on the basis of trust assets that the association administers primarily
from offices located in that State.
Sec. 550.16 Fiduciary compensation.
(a) Compensation of association. If the amount of a Federal savings
association's compensation for acting in a fiduciary capacity is not
set or governed by applicable law, the association may charge a
reasonable fee for its services.
(b) Compensation of co-fiduciary officers and employees. A Federal
savings association may not permit any officer or employee to retain
any compensation for acting as a co-fiduciary with the association in
the administration of a fiduciary account, except with the specific
approval of the association's board of directors.
(c) Bequests or gifts to trust officers and employees. A Federal
savings association may not permit any fiduciary officer or employee to
accept a bequest or gift of fiduciary assets, unless the bequest or
gift is directed or made by a relative of the officer or employee or is
specifically approved by the association's board of directors.
Sec. 550.17 Receivership or voluntary liquidation.
If the OTS appoints a conservator or receiver for a Federal savings
association under part 558 of this chapter, or if a Federal savings
association places itself in voluntary liquidation, the receiver,
conservator, or liquidating agent must promptly close or transfer to a
substitute fiduciary, all fiduciary accounts, in accordance with OTS
instructions and the orders of the court having jurisdiction.
Sec. 550.18 Surrender of fiduciary powers.
(a) Filing of board resolution. A Federal savings association
seeking to surrender its fiduciary powers must file with the OTS a
certified copy of the resolution of its board of directors evidencing
that intent. The resolution must be filed in accordance with Sec. 516.1
of this chapter.
(b) Issuance of OTS notice. If, after appropriate investigation,
the Regional Director is satisfied that the Federal savings association
has been discharged from all fiduciary duties, the Regional Director
will issue a written notice to the association indicating that the
association is no longer authorized to exercise fiduciary powers.
(c) Recovery of securities deposited with State authorities. Upon
issuance of the OTS written notice, the Federal savings association may
recover any securities deposited under Sec. 550.15.
Sec. 550.19 Revocation of fiduciary powers.
(a) Revocation standards. The OTS may revoke a Federal savings
association's authority to exercise fiduciary powers under this part,
if the OTS determines that the association:
(1) Has unlawfully or unsoundly exercised those fiduciary powers;
(2) Has failed to exercise those fiduciary powers for five
consecutive years; or
(3) Has otherwise failed to comply with the requirements of this
part.
(b) Revocation procedures. Revocation procedures are set forth in
12 U.S.C. 1464(n)(10). The hearing required under 12 U.S.C.
1464(n)(10)(B) will be conducted in accordance with part 509 of this
chapter.
PART 563e--COMMUNITY REINVESTMENT
4. The authority citation for part 563e continues to read as
follows:
Authority: 12 U.S.C. 1462a, 1463, 1464, 1467a, 1814, 1816,
1828(c) and 2901 through 2907.
5. Section 563e.11 is amended by revising paragraph (c) to read as
follows:
[[Page 39490]]
Sec. 563e.11 Authority, purposes and scope.
* * * * *
(c) Scope--(1) General. This part applies to all savings
associations except as provided in paragraph (c)(2) of this section.
(2) Certain special purpose savings associations. This part does
not apply to special purpose savings associations that do not perform
commercial or retail banking services by granting credit to the public
in the ordinary course of business, other than as incident to their
specialized operations. These associations include banker's banks, as
defined in 12 U.S.C. 24 (Seventh), and associations that engage only in
one or more of the following activities: providing cash management
controlled disbursement services or serving as correspondent
associations, trust companies or clearing agents.
Dated: July 14, 1997.
By the Office of Thrift Supervision.
Nicolas P. Retsinas,
Director.
[FR Doc. 97-19157 Filed 7-22-97; 8:45 am]
BILLING CODE 6720-01-P