Fiduciary Powers

Fiduciary Powers

Expansionary Activities

Comptroller’s Licensing Manual

Washington, DC
June 2002

Fiduciary Powers

Table of Contents

Introduction
Applicability
Definitions
Key Policies
General
Decision Criteria
Special Conditions
Summary of Process
Expedited Review
After-the-fact Notice
Commencement of Activity
Surrender or Revocation of Fiduciary Powers
Surrender
Revocation
Procedures: Filing the Application
Procedures: After-the-fact Notice
Procedures: Surrender of Fiduciary Powers
References

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Introduction
A national bank that wishes to commence fiduciary powers must obtain
approval from the Comptroller of the Currency (OCC). This booklet
addresses the policies and procedures to guide a national bank in submitting
a request to exercise these fiduciary powers or a notice that a bank is
exercising fiduciary powers in a new state.
The corporate filing requirement that describes procedures for fiduciary
powers, 12 CFR 5.26(e), clarifies the circumstances under which the OCC
requires a bank to obtain approval to exercise those powers. It also states that
approval of a fiduciary (trust) powers application constitutes a permit under
12 USC 92a to conduct such activities. Accordingly, the OCC will not issue a
separate permit document.
This booklet also addresses the procedures for a national bank to surrender its
fiduciary powers and for the OCC to revoke those powers.

Applicability
When a national bank decides to expand its business by offering fiduciary
services, the OCC requires it to seek prior approval before offering such
services to the public. A state bank or a federal or state savings association
with fiduciary powers that converts to a national bank or merges into a
national bank not previously authorized to exercise fiduciary powers also
must seek OCC approval.
The OCC requires a national bank with OCC-approved fiduciary powers to
file an after-the-fact notice when it begins fiduciary activities in a new state.
A separate application for fiduciary powers is not required when:
•

One or more national banks merge or consolidate with a national bank
that has fiduciary powers.

•

A national bank with fiduciary powers is the resulting bank in a merger
or consolidation with a state bank.

•

An applicant applies to organize a special-purpose charter for a national
bank limited to fiduciary or trust activities using 12 CFR 5.20.

•

An operating subsidiary exercises fiduciary powers if its parent bank has
been authorized to exercise them.

•

A national bank authorized to engage in trust activities under 12 USC
92a establishes a trust office.
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•

A national bank authorized to engage in trust activities under
12 USC 92a establishes a trust representative office for the convenience
of its customers.

Definitions
The applicable law means the law of a state or other jurisdiction governing a
national bank’s fiduciary relationships, any applicable federal law governing
those relationships, the terms of instruments governing fiduciary relationships,
or court orders pertaining to those relationships.
An eligible bank is a national bank that:
•

Has a composite CAMELS rating of 1 or 2.

•

Has a satisfactory or better Community Reinvestment Act (CRA) rating.
(This factor does not apply to an uninsured bank or branch or a special
purpose bank covered by 12 CFR 25.11(c)(3).)

•

Is well capitalized as defined at 12 CFR 6.4(b)(1).

•

Is not subject to a cease and desist order, consent order, formal written
agreement, or Prompt Corrective Action directive or, if subject to any
such order, agreement or directive, is informed in writing by the OCC
that the bank may be treated as an ”eligible bank.”

A fiduciary account means an account administered by a national bank
acting in a fiduciary capacity.
Fiduciary capacity means 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 bank receives a fee for
its investment advice; any capacity in which the bank possesses investment
discretion on behalf of another; or any other similar capacity that the OCC
authorizes pursuant to 12 USC 92a.
Fiduciary powers mean the authority the OCC permits a bank to exercise
pursuant to 12 USC 92a. The extent of fiduciary powers is the same for outof-state national banks as for instate national banks and that extent depends
upon what powers the state grants to the fiduciaries in the state with which
national banks compete.
A trust representative office means an office of a national bank, other than a
main office, branch or trust office, at which the bank performs activities
ancillary to its fiduciary business, but does not engage in any of the activities
specified in 12 CFR 9.7(d). A trust representative office is not a "branch" for
purposes of 12 USC 36, unless it is also an office at which deposits are
received, or checks paid, or money lent.
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A trust office means an office of a national bank, other than a main office,
branch, or trust representative office, at which the bank engages in one or
more of the activities specified in 12 CFR 9.7(d). Pursuant to 12 USC 36(j), a
trust office is not a "branch" for purposes of 12 USC 36, unless it is also an
office at which deposits are received, or checks paid, or money lent.

Key Policies
General
Fiduciary or trust powers allow a bank to act in a fiduciary capacity. The
OCC views the exercise of fiduciary powers primarily as a management
decision of the national bank. Normally, the OCC grants only full fiduciary
powers authorized under 12 USC 92a. In unusual cases, it may grant limited
powers.
The OCC generally grants permission to exercise fiduciary powers to a bank
operating in a satisfactory manner, if:
•

The proposed fiduciary activities comply with applicable laws, including
state, federal, and local statutes.

•

The bank retains qualified trust management.

If a bank intends to establish a trust office limited solely to exercising
fiduciary powers, the OCC does not require a branch application.
The OCC requires that banks chartered for less than two years submit a
business plan for the trust department or fiduciary operation. The OCC may
request various types and amounts of information depending upon the bank’s
condition. The sample Fiduciary Business Plan outlines the type of
information that may be requested.
A bank with existing fiduciary powers may offer services in multiple states
through branches, trust offices, or trust representative offices in such states.
Such a bank may exercise any of the fiduciary powers granted in 12 USC
92a(a) in any state, unless that state prohibits both national banks and
competing institutions in its own state from exercising that fiduciary power.
The trust officers and staff should become thoroughly familiar with ”Fiduciary
Activities of National Banks” at 12 CFR 9 and other applicable laws, such as
the Employee Retirement Income Security Act of 1974 (ERISA).

Decision Criteria
When deciding whether to approve, conditionally approve, or deny a bank’s
application for fiduciary or trust services, the OCC will consider:
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•

The adequacy of bank capital and surplus (that is, whether capital and
surplus are sufficient under the circumstances and not less than the
capital and surplus required by state law of state banks, trust companies,
or other corporations exercising fiduciary powers under state law).

•

The character and ability of proposed trust management, including
qualifications, experience, and competency. The OCC must approve
any trust management change the bank makes prior to commencing trust
activities.

•

Whether the proposed activity contravenes applicable law.

•

The adequacy of the proposed business plan, if applicable.

•

The needs of the customers to be served.

The OCC may deny the application if the bank’s activities do not comply with
any of these decision criteria.

Special Conditions
The OCC may conditionally approve a filing, including one accorded
expedited processing, after reviewing the application and considering the
relevant factors. The OCC may apply conditions to ensure that approval is
consistent with applicable law, to protect the safety and soundness of the
bank, to protect customers, to prevent or control conflicts of interest, or to
further other supervisory or policy considerations.
The OCC may apply those conditions as ”conditions imposed in writing”
within the meaning of 12 USC 1818. The conditions remain in effect after
the effective date or consummation date of an approved transaction or activity
and continue until the OCC removes them.

Summary of Process
When a bank wishes to offer fiduciary services, it submits an application in
letter form, providing specific information for review (see Procedures section
of this booklet) and the appropriate filing fee. In addition to the standard
review process, the OCC has an expedited review process and an after-thefact notice. Only an eligible bank may apply under the expedited process.
For banks that do not qualify, the standard review process must be followed.
A bank that is ineligible for expedited processing may not exercise fiduciary
powers until the OCC grants permission or informs the bank in writing of its
decision.
OCC approval of an application constitutes a permit to conduct the fiduciary
powers requested.
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Expedited Review
To qualify for the expedited review process, the bank must meet the
definition of an eligible bank. Also the filing must qualify for expedited
processing (that is, the filing is reviewed to ensure that all information has
been submitted and contains no significant or novel policy issues). A sample
application and procedures are provided outlining the information to be
submitted for review (see Procedures: Filing the Application in this booklet).
The OCC reviews an eligible bank’s application under the expedited review
process, unless it notifies the bank prior to the 30th day after receipt that it is
not eligible for expedited review under the decision standards of 12 CFR
5.13(a)(2).
Procedurally, the OCC sends the bank a letter prior to the 30th day approving
the bank's request to exercise fiduciary powers. If the OCC does not send
such a letter, the application is deemed approved automatically 30 calendar
days after the OCC receives the application.
An eligible bank may omit the opinion of bank’s counsel required for the
standard review. If circumstances warrant, however, the OCC may require an
opinion, indicating that the proposed fiduciary activities do not violate
applicable law. The applicant must submit this opinion prior to commencing
the activity.

After-the-Fact Notice
If a bank has obtained OCC approval to provide fiduciary services and wishes
to expand its business into additional states, it must provide written notice to
the OCC within 10 days after commencing fiduciary activities in the new
state.
A sample application and procedures are provided that outline the
information to be submitted for review (see Procedures—After-the-Fact Notice
in this booklet).

Commencement of Activity
The bank must begin exercising trust activities within 18 months of approval,
unless the OCC grants an extension. A bank should notify the OCC in writing
(see Application forms) within 10 days of beginning those activities.

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Surrender or Revocation of Fiduciary Powers
Surrender
A bank that wishes to discontinue and surrender voluntarily its authority to
exercise fiduciary powers must file with the OCC a certified copy of a board
of directors’ resolution that signifies its desire to do so in accordance with
12 CFR 9.17(a). It also must return or destroy any trust permit previously
issued.
The bank may be classified either as inactive or it may surrender its fiduciary
powers altogether. In either case, the board of directors must arrange for a
final audit of the fiduciary accounts. In addition, the OCC may conduct a
closing investigation to determine if the bank has been discharged completely
from its fiduciary obligations (that is, all accounts have been properly closed
and distributed or transferred to substitute fiduciaries). The district office will
decide whether to conduct a closing investigation.
After the OCC is assured that the bank has been relieved of all fiduciary
duties according to applicable law, it will issue to the bank a written notice
that the bank is no longer authorized to exercise the fiduciary powers
previously granted.

Revocation
Pursuant to 12 USC 92a(k) and 12 CFR 9.17(b), the OCC may notify a
national bank of its intent to revoke the authority to exercise fiduciary powers.
If the OCC determines that the bank has exercised its fiduciary powers
unlawfully or unsoundly, the OCC may revoke those powers. At that time,
the bank must return or destroy any trust permit previously issued.
The OCC also may revoke a bank’s fiduciary powers if the bank has failed to
exercise the powers granted for a period of five consecutive years. However,
the OCC does not revoke such powers or initiate such actions to revoke
merely because of inactivity.

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Procedures: Filing the Application
Licensing Staff
1. Refers a bank that requests instructions to the ”General Policies and
Procedures” (GPP) booklet and this booklet of the Comptroller’s Licensing
Manual.

Bank
2. Submits to the appropriate licensing manager an application to exercise
fiduciary powers (see Application Forms).
An expedited application must contain:
__ A statement requesting full or limited powers. (Limited powers must
be specified.)
__ A description of the location(s) in which the services will be offered.
__ A statement that the capital and surplus of the bank are not less than
that required by state law for state banks, trust companies, and other
corporations chartered by that state that exercise comparable
fiduciary powers.
__ Sufficient biographical information on the proposed trust
management personnel, including educational and professional
credentials and a five-year employment history, emphasizing their
trust experience and discussing their ability to perform the proposed
activities.
__ The prescribed filing fee (see OCC Bulletin -- Notice of the
Comptroller of the Currency Fees).
For a standard application, the following additional items are required:
__ An opinion of bank’s counsel that the proposed fiduciary activities
do not violate applicable law, including citations.
__ (For banks chartered less than two years) a business plan for the trust
department that contains, at a minimum, its projected earnings, size,
services, and target market (see Application Forms).

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Review
Licensing Staff
3. Sends an acknowledgment letter within five business days of receipt, if
applicable.
4. Forwards the correct filing fee and the deposit memorandum (Form
6043-01) to the Comptroller of the Currency, P.O. Box 73150, Chicago,
Illinois 60671-7150. Retains a copy of the memorandum in the official
file.
5. Initiates and enters appropriate information into the Corporate Activities
Information System (CAIS).
6. Establishes an official file to maintain all original documents.
7. Contacts the Congressional Liaison in Washington whenever written or
telephone inquiries are received from congressional members or their
staff. All congressional inquiries must be documented in the official file.
8. Reviews the application and any other relevant information about the
bank and determines if the bank is an eligible bank.
9. Within five business days of receipt notifies the appropriate portfolio
manager and Assistant Deputy Comptroller (ADC) of the filing and solicits
comments from other OCC divisions, as appropriate, with a preliminary
response required within 15 days.
10. Requests clarification or additional information, as necessary.

Decision
11. Prepares a confidential memorandum and decision letter recommending a
decision to the delegated official.
12. Decides application under delegated authority or forwards the official file
to Headquarters Licensing (HQ LIC), Washington, DC, for decision. If
referred to HQ LIC, go to step 17.
13. If delegated, notifies the bank of the decision and sends a decision letter.
14. If the application is conditionally approved or denied, forwards a copy of
the confidential memorandum and decision letter to the HQ LIC.
15. Makes appropriate CAIS entries. Notifies the appropriate portfolio
manager and Assistant Deputy Comptroller (ADC) of the decision by
forwarding updated CAIS comments and, if warranted, advises of any
written conditions or supervisory concerns in the decision.
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16. Goes to step 27.

HQ LIC
17. Makes appropriate CAIS entries.
18. Solicits comments from other OCC divisions, as appropriate.
19. Reviews the file and all relevant information, makes a recommendation,
and forwards the official file to the appropriate Washington delegated
official for decision.
20. Decides the filing.
21. Notifies the bank and licensing manager of the decision by telephone and
letter, giving the reasons for the action when necessary.
22. If the application is conditionally approved or denied, forwards a copy of
the confidential memorandum, decision document, and transmittal letter
to Licensing Policy and Systems.
23. Makes appropriate CAIS entries. Notifies the appropriate portfolio
manager and Assistant Deputy Comptroller (ADC) of the decision by
forwarding updated CAIS comments and, if warranted, advises of any
written conditions or supervisory concerns in the decision.
24. If denied, goes to step 27.
25. Returns the official file to the district for additional processing (for
example, conditional approval).

Bank
26. Notifies the OCC no later than 10 days after commencement of fiduciary
activities.

Close Out
Licensing Staff/HQ LIC
27. Reviews the bank’s notice of commencing activities and the file for
completeness and forwards it to Central Records.
28. Reviews CAIS entries for completeness and accuracy. Makes appropriate
CAIS entries to indicate that fiduciary powers are effective and that the
filing is closed out.
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Procedures: After-the-Fact Notice
Licensing Staff
1. Refers a bank that requests instructions to the ”General Policies and
Procedures” (GPP) and this booklet of the Comptroller’s Licensing
Manual.

Bank
2. Submits to the appropriate licensing manager a notice that it is exercising
fiduciary powers in another state. The notice contains:
__ The identity of the state(s) involved.
__ A description of the activities to be conducted to the extent that they
differ materially from those previously authorized.
__ A discussion of any contact with the state authority and any
impediment to the exercise of such powers.

Review
Licensing Staff
3. Initiates and enters appropriate information into the Corporate Activities
Information System (CAIS).
4. Reviews the notice and verifies that:
•

The bank provided the notice within 10 days after commencing the
fiduciary activities in another state.

•

The notice contains the required criteria in step 2.

5. If the notice is sufficient, sends an acknowledgment letter and skips to
step 10.
6. If the notice is insufficient or filed incorrectly, contacts the bank for
clarification or missing information.
7. Reviews any additional information and makes appropriate CAIS entries.
8. Sends an acknowledgment letter.

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Close Out
9. Reviews CAIS entries for completeness and accuracy. Forwards the
notice to Central Records.

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Procedures: Surrender of Fiduciary Powers
Bank
1. Arranges for a final audit of the fiduciary accounts.
2. Submits to the appropriate licensing manager a certified copy of a board
of directors’ resolution that it desires to surrender its fiduciary powers.
3. Returns to the licensing staff or destroys the OCC’s original trust permit, if
issued.

Review
Licensing Staff
4. Decides whether to conduct a closing investigation to determine if the
bank has been discharged completely from its fiduciary obligations.
5. After assuring that the bank is relieved of all fiduciary duties, prepares and
issues a written notice that the bank is no longer authorized to exercise
fiduciary powers.
6. Makes appropriate CAIS entries to indicate that fiduciary powers are no
longer authorized.

Close Out
7. Reviews the file for completeness and forwards it to Central Records.

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References
Activities
Bulletins
Civil Money Penalties
Laws
Issuance
Computation of Time
Regulation

OCC 96-25, 97-22
12 USC 504, 1818(I)
18 USC 1001, 1007
PPM-5000-7 (Rev.)
12 CFR 5.12

Daily Fee Rate for Special Examinations
Regulation
12 CFR 8.6
Decisions
Regulation

12 CFR 5.13

Definitions
Regulation

12 CFR 5.26 and 9.2

Employee Retirement Income Security Act of 1974
Law
29 USC 1001
Environmental Liability
Laws

42 USC 9601-9675

Fiduciary Income
Bulletin

OCC 96-12

Fiduciary Powers
Law
Regulations

12 USC 92a
12 CFR 5.26, 9

Filing Fees
Regulation

12 CFR 5.5

Filing Forms
Regulation

12 CFR 5.4

Glass-Steagall Act
Laws

12 USC 78, 377

Investigations
Regulation

12 CFR 5.7
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Recordkeeping and Confirmation Requirements for Securities Transactions
Regulation
12 CFR 12
Rules of General Applicability
Regulation

12 CFR 5.2

Surrender or Revocation of Powers
Regulation
12 CFR 9.17
Time Limit
Law

12 USC 4807

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