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Trust & Asset Management Oversight
Office of Thrift Supervision
FIRMA National Risk Management Training Conference
April 9, 2008
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Contact Numbers
Judi McCormickDirector, Trust & Specialty ProgramsWashington DC(202) [email protected]
John RudolphTrust Policy SpecialistWashington DC(202) [email protected]
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Contact Numbers
Tara FrenchNortheast Region – Jersey City NJ(201) [email protected]
Paul W. KellyMidwest Region – Dallas TX(972) [email protected]
Lazaro BarreiroSoutheast Region – Atlanta GA(404) [email protected]
Kevin SwansonWest Region – Daly City CA(650) [email protected]
Neal O’BrienCentral Region – Chicago IL(312) [email protected]
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Governing Rules & RegulationsHome Owners Loan Act (HOLA) - Section 5(n)
(12 U.S.C. § 1464(n))
Authorizes fiduciary powers for thrifts
OTS Regulation – 12 C.F.R. 550
Defines fiduciary capacity Describes how to get fiduciary powers Grants exemptions for certain activities Addresses the proper exercise of fiduciary powers Provides for the surrender or revocation of fiduciary
powers
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When Do You Need Fiduciary Powers?
Generally, when you act as:TrusteeExecutor or AdministratorRegistrar of stocks and bondsTransfer AgentAssigneeReceiverGuardian or ConservatorFiduciary under Uniform Gifts/Transfers to Minors ActsInvestment adviser for a feeAny capacity where you have investment discretion
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When Can You Act Without Fiduciary Powers?
Generally, when you act as:Trustee of your own employee benefit planTrustee/Custodian of self-directed IRA’s, Roth
IRA’s, Health/Medical Savings Accounts, or Education Savings Accounts
Agent, Custodian, Escrow Agent, or Safekeeping Agent with no investment advice or discretion
(If you have any question as to whether fiduciary powers are needed, contact the Regional OTS Office responsible for your supervision)
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When Can You Act Without Fiduciary Powers (con’t)?
Examples of activities include:Networking arrangementsUnderwriting securitiesPrivate banking/wealth management
(May incorporate activities requiring fiduciary powers)
Back office support for mutual or hedge fundsSweep arrangements into money market mutual
funds(If you have any question as to whether fiduciary powers are needed,
contact the Regional OTS Office responsible for your supervision)
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What’s Driving The Trust and Asset Management Business?? Aging Baby Boomers!!
80 million of us who remember (and have now gone back to) AM radio; who’s first car was a used Pinto, Chevette, or Gremlin; and who still have 8-tracks in a box in the basement, will start to retire over the next decade or so
We will have $13 trillion to go into trusts, IRA’s, investment management accounts, and custodial accounts
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OTS Supervised Institutions
Region Trust-Only Thrifts
Trust Departments of Thrifts
Northeast 6 23Southeast 2 14Central 6 20Midwest 3 15West 3 10
Total 19 82
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Trust Assets in OTS Supervised Institutions
(12/31/07)
Region Trust-Only Thrifts($ millions)
Trust Departments of Thrifts($ millions)
Totals
($ millions)
Northeast 255,321 229,580 484,901Southeast 901 27,566 28,467Central 41,199 68,755 109,954Midwest 15,619 9,958 25,577West 179,670 31,195 210,865
Total 492,711 367,052 859,764
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Trust-Only Institutions
An institution with a thrift charter restricting activities to trust and related functions
Exempt from the requirements of CRA – 12 C.F.R. 563e.11(c)(2)
Generally maintain a deposit of $500,000 to qualify for federal deposit insurance
Must meet the QTL test and so they generally maintain their $500,000 deposit in mortgage-backed securities.
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Trust-Only Institutions
Trust-Only Institution exams are focused on the trust and asset management activities but include review of the limited banking activities performed
Both CAMELS (bank) and MOECA (trust) ratings are assigned
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Trust Exam Frequency Trust department and trust-only institution exam
frequency guidelines were revised in October 2007
Generally: The trust department exam should be performed
closely in time to the thrift exam so that significant findings or concerns can be reflected and addressed in the overall assessment of the thrift and factored into its CAMELS rating
The exam schedule for trust-only institutions continues to be driven by the statutory examination requirements for thrift examinations – generally once every 18 months
CAMELS and MOECA ratings, management or business line changes, changing financial condition, and other factors may impact the scope and frequency of exams
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Trust Exam Scope All the traditional risk-focused trust and asset
management exam guidelines for trust departments and trust-only institutions remain
You may see trust examiners venturing into other areas not traditionally in their trust exam scope, e.g.:
Private banking/wealth management activities IRA, HSA, and other similar relationships administered
in the bank Municipal and Government Securities Dealer and
Transfer Agent activities performed in the thrift or holding company – CEO Memo 258
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Topics for Discussion To be finally determined closer to conference
date, but will likely include:
First - brief discussions of: Reg R CEO Memo 258 The expanding role of the OTS Trust Examiner Outsourcing and the use of 3rd party service providers Conflicts of interest and self-dealing when using
affiliates or otherwise-related entities
Then: Any questions you have that are of general interest for the group - I’ll tell you whatever I know!
