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TRUST AND SAVINGS DEPARTMENTS.
113. Trust powers of national banks
Statutory provisions and regu-
trust company powers to trust
115. Form used in connection with
the granting of trust company
powers. 116. Savings departments of national
113. TRUST POWERS OF NATIONAL BANKS/STATUTORY PROVISIONS AND
REGULATIONS OF THE FEDERAL RESERVE BOARD.
I. STATUTORY PROVISIONS.
The Federal reserve act as amended by the act of September 26, 1918, provides in part:
(Sec. 11.) The Federal Reserve Board shall be authorized and empowered:
(k) To grant by special permit to national banks applying therefor, when not in contravention of State or local law, the right to act as trustee, executor, administrator, registrar of stocks and bonds, guardian of estates, assignee, receiver, committee of estates of lunatics, or in any other fiduciary capacity in which State banks, trust companies, or other corporations which come into competition with national banks are permitted to act under the laws of the State in which the national bank is located.
Whenever the laws of such State authorize or permit the exercise of any or all of the foregoing powers by State banks, trust companies, or other corporations which compete with national banks, the granting to and the exercise of such powers by national banks shall not be deemed to be in contravention of State or local law within the meaning of this act.
National banks exercising any or all of the powers enumerated in this subsection shall segregate all assets held in any fiduciary capacity from the general assets of the bank and shall keep a separate set of books and records showing in proper detail all transactions engaged in under authority of this subsection. Such books and records shall be open to inspection by the State authorities to the same extent as the books and records of corporations organized under State law which exercise fiduciary powers, but nothing in this act shall be construed as authorizing the State authorities to examine the books, records, and assets of the national bank which are not held • in trust under authority of this subsection.
No national bank shall receive in its trust department deposits of current funds subject to check or the deposit of checks, drafts, bills of exchange, or other items for collection or exchange purposes. Funds deposited or held in trust by the bank awaiting investment shall be carried in a separate account and shall not be used by the bank in the conduct of its business unless it shall first set aside in the trust department United States bonds or other securities approved by the Federal Reserve Board.
In the event of the failure of such bank the owners of the funds held in trust for investment shall have a lien on the bonds or other securities so set apart in addition to their claim against the estate of the bank.
Whenever the laws of a State require corporations acting in a fiduciary capacity to deposit securities with the State authorities for the protection of private or court trusts, national banks so acting shall be required to make similar deposits and securities so deposited shall be held for the protection of private or court trusts, as provided by the State law.
National banks in such cases shall not be required to execute the bond usually required of individuals if State corporations under similar circumstances are exempt from this requirement.
National banks shall have power to execute such bond when so required by the laws of the State.
In any case in which the laws of a State require that a corporation acting as trustee, executor, administrator, or in any capacity specified in this section, shall take an oath or make an affidavit, the president, vice president, cashier, or trust officer of such national bank may take the necessary oath or execute the necessary affidavit.
It shall be unlawful for any national banking association to lend any officer, director, or employee any funds held in trust under the powers conferred by this section. Any officer, director, or employee making such loan, or to whom such loan is made, may be fined not more than $5,000, or imprisoned not more than five years, or may be both fined and imprisoned, in the discretion of the court.
In passing upon applications for permission to exercise the powers enumerated in this subsection, the Federal Reserve Board may take into consideration the amount of capital and surplus of the applying bank, whether or not such capital and surplus is sufficient under the circumstances of the case, the needs of the community to be served, and any other facts and circumstances that seem to it proper, and may grant or refuse the application accordingly: Provided, That no permit shall be issued to any national banking association having a capital and surplus less than the capital and surplus required by State law of State banks, trust companies, and corporations exercising such powers.
A national bank desiring to exercise any or all of the powers authorized by section 11 (k) of the Federal reserve act, as amended by the act of September 26, 1918, shall make application to the Federal Reserve Board, on a form approved by said board, for a special permit authorizing it to exercise such powers. In the case of an original application—that is, where the applying bank has never been granted the right to exercise any of the powers authorized by section 11 (k), the application should be made on Form 61. In the case of a supplemental application—that is, where the applying bank has already been granted the right to exercise one or more of the powers authorized by section 11 (k), the application should be made on Form 61-b. Both forms are made a part of this regulation and may be obtained from the Federal Reserve Board or any Federal reserve bank.
III. SEPARATE DEPARTMENTS.
Every national bank permitted to act under this section shall establish a separate trust department, and shall place such department under the management of an officer or officers, whose duties shall be prescribed by the board of directors of the bank.
IV. CUSTODY OF TRUST SECURITIES AND INVESTMENTS.
The securities and investments held in each trust shall be kept separate and distinct from the securities owned by the bank and separate and distinct one from another. Trust securities and investments shall be placed in the joint custody of two or more officers or other employees designated by the board of directors of the bank and all such officers and employees shall be bonded.
V. DEPOSIT OF FUNDS AWAITING INVESTMENT OR DISTRIBUTION.
Funds received or held in the trust department of a national bank awaiting investment or distribution may be deposited in the commercial department of the bank to the credit of the trust department, provided that the bank first delivers to the trust department, as collateral security, United States bonds, or other readily marketable securities owned by the bank, equal in market value to the amount of the funds so deposited.
VI. INVESTMENT OF TRUST FUNDS.
(a) Private trusts.-Funds held in trust must be invested in strict accordance with the terms of the will, deed, or other instrument creating the trust. Where the instrument creating the trust contains provisions authorizing the bank, its officers, or its directors to exercise their discretion in the matter of investments, funds held in trust may be invested only in those classes of securities which are approved by the directors of the bank. Where the instrument creating the trust does not specify the character or class of investments to be made and does not expressly vest in the bank, its officers, or its directors a discretion in the matter of investments, funds held in trust shall be invested in any securities in which corporate or individual fiduciaries in the State in which the bank is located may lawfully invest.
(6) Court trusts.—Except as hereinafter provided, a national bank acting as executor, administrator, or in any other fiduciary capacity, under appointment by a court of competent jurisdiction, shall make all investments under an order of that court, and copies of all such orders shall be filed and preserved with the records of the trust department of the bank. If the court by general order vests a discretion in the national bank to invest funds held in trust, or, if under the laws of the State in which the bank is located corporate fiduciaries appointed by the court are permitted to exercise such discretion, the national bank so appointed may invest such funds in any securities in which corporate or individual fiduciaries in the State in which the bank is located may lawfully invest.
VII. BOOKS AND ACCOUNTS.
All books and records of the trust department shall be kept separate and distinct from other books and records of the bank. All accounts opened shall be so kept as to enable the national bank at any time to furnish information or reports required by the Federal or State authorities, and such books and records shall be opened to the inspection of such authorities.
Examiners appointed by the Comptroller of the Currency or designated by the Federal Reserve Board will be instructed to make thorough and complete audits of the cash, securities, accounts, and investments of the trust department of the bank at the same time that examination is made of the banking department.
IX. CONFORMITY WITH STATE LAWS.
Nothing in these regulations shall be construed to give a national bank exercising the powers permitted under the provisions of section 11 (k) of the Federal reserve act, as amended, any rights or privileges in contravention of the laws of the State in which the bank is located within the meaning of that act.
X. REVOCATION OF PERMITS. The Federal Reserve Board reserves the right to revoke permits granted under the provisions of section 11 (k), as amended, in any case where in the opinion of the board a bank has willfully violated the provisions of the Federal reserve act or of these regulations or the laws of any State relating to the operations of such bank when acting in
any of the capacities permitted under the provisions of section 11 (k), as amended.
XI. CHANGES IN REGULATIONS. These regulations are subject to change by the Federal Reserve Board; provided, however, that no such change shall prejudice any cbligation undertaken in good faith under regulations in effect at the time the obligation was assumed. 114. ISSUANCE OF PERMIT TO EXERCISE TRUST COMPANY POWERS TO
TRUST COMPANY CONVERTING INTO NATIONAL BANK. If a trust company converting into a national bank desires to have the Federal Reserve Board issue to it a permit to exercise trust powers, under the provisions of section 11 (k) of the Federal reserve act, simultaneously with the issue by the Comptroller of certificate authorizing the commencement of business as a national bank, it is essential that the trust company shall file an application with the Federal Reserve Board through the Federal reserve bank of its district, at or about the same time that the application is made to the Comptroller for conversion, in order that the board may determine in advance whether it may properly issue the desired permit.
In a case of this character the application blank and the resolution of the board of directors of the applying institution should be so amended as to indicate that the permit of the Federal Reserve Board is to be issued coincidently with the issuance of the Comptroller's certificate authorizing the trust company to begin business as a national bank.
115. FORMS USED IN CONNECTION WITH THE GRANTING OF TRUST
COMPANY POWERS. The following are the forms used in connection with application for and issuance of a permit by the Federal Reserve Board to exercise trust powers:
NOTE.-This application, when executed, should be mailed to the Chairman of the
APPLICATION OF NATIONAI. BANK
For permission to act as trustee, executor, administrator, registrar of stocks and bonds, guardian of estates, assignee, receiver, committee of estates of