The Federal Deposit Insurance Corp. (FDIC) is removing from its roster of regulations some old rules on trust powers that were promulgated by the Office of Thrift Supervision (OTS), but it’s modifying FDIC rules to take the place of those regulations for state savings associations and non-member banks.
However, the modified rules still require explicit FDIC permission before a state savings association or nonmember bank exercises trust powers.
The final rule will take effect Jan. 1 to rescind and remove Fiduciary Powers of State Savings Associations regulations from the U.S. Code of Federal Regulations (CFR); and to amend current FDIC regulations regarding consent to exercise trust powers to reflect the applicability of these parts to both state savings associations and state nonmember banks.
The file rule was published Monday in the Federal Register; it was proposed in April.
Rules by the OTS, the former federal regulator of thrifts and savings associations which was abolished by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank), were absorbed by the Office of the Comptroller of the Currency (OCC) for both federal and state savings associations.
But FDIC retained some authority for savings associations regulations as the ‘‘appropriate Federal banking agency.”
“As a result, when the FDIC acts as the designated ‘appropriate Federal banking agency’ for State savings associations and State nonmember banks, as it does here, the FDIC is authorized to issue, modify, and rescind regulations involving such institutions,” FDIC said in its Register notice.
In 2011, the FDIC began making changes to its regulations to reflect its authority, the agency said, specifically noting that it would evaluate the transferred OTS regulations and “might later incorporate them into other FDIC rules, amend them, or rescind them, as appropriate.”
The final rule, according to FDIC, adds a new section to agency rules (as proposed) explicitly requiring state savings associations and nonmember banks to obtain FDIC prior written consent before exercising trust powers. For state nonmember banks, the new section 333.3 makes explicit the FDIC’s existing requirement that state nonmember banks receive the FDIC’s consent before initially exercising trust powers, as such an action would constitute a change in the bank’s general character or business under existing regulations (12 CFR 333.2), the FDIC notice stated.
For state savings associations, the new section adds a new requirement for those institutions to obtain the FDIC’s prior written consent should they choose in the future to exercise trust powers granted by their state chartering authorities. “In effect, section 333.3 makes the requirement to file an application consistent for both State savings associations and State nonmember banks,” the FDIC notice stated.
The final rule also revises FDIC regulations (also as proposed) to permit both state savings associations and nonmember banks to act as custodians for qualifying retirement, education, and health savings accounts, or other similar accounts without being deemed to exercise trust powers, and therefore without obtaining the FDIC’s prior written consent.
Also under the final rule, neither state savings associations nor nonmember banks are required to receive the FDIC’s prior written consent to exercise trust powers when:
- The institution received authority to exercise trust powers from its chartering authority prior to Dec. 1, 1950; or
- The institution continues to conduct trust activities pursuant to authority granted by its chartering authority subsequent to a charter conversion or withdrawal from membership in the Federal Reserve System.
The agency said in the notice that it had proposed to amend its rules to list specific documents typically filed as part of an application to exercise trust powers. “Upon further consideration, the FDIC determined not to list these items in the final rule in order to avoid duplication with the items already listed in the instructions on the existing application form for consent to exercise trust powers and the need for additional, corresponding changes to section 303.242(c) to reflect any future updates to the existing form,” the FDIC stated. “Accordingly, the final rule does not change section 303.242(c), which continues to provide that the required filing shall consist of the completed application form.”