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FEDERAL RESERVE BOARD WASHINGTON X-6870 ADDRESS OFFICIAL CORRESPONDENCE T O T H E FEDERAL RESERVE BOARD A p r i l 22, 1931. SUBJECT: A p p l i c a t i o n s f o r T r u s t Powers. Dear S i r : I n 1915 t h e F e d e r a l Reserve Board a d d r e s s e d a l e t t e r t o t h e F e d e r a l r e s e r v e a g e n t s of t h e v a r i o u s F e d e r a l r e s e r v e "banlcs s e t t i n g f o r t h c e r t a i n p r i n c i p l e s f o r t h e i r guidance i n making recommendations t o t h e Board on a p p l i c a t i o n s of n a t i o n a l "banks f o r a u t h o r i t y t o e x e r c i s e t r u s t powers. A t t e n t i o n i s a g a i n i n v i t e d t o t h i s l e t t e r , copy of which I s a t t a c h e d . The p r o c e d u r e i n h a n d l i n g t h e s e a p p l i c a t i o n s h a s s i n c e "been anended, i n t h a t t h e F e d e r a l r e s e r v e a g e n t s now t r a n s m i t them w i t h a recommendation of t h e E x e c u t i v e Committee or Board of D i r e c t o r s of t h e i r r e s p e c t i v e "banks. I n most c a s e s , however, l i t t l e , i f a n y , i n f o r m a t i o n i s g i v e n t h e Board as t o t h e "basis of t h e recommendation, o t h e r t h a n i s f u r n i s h e d i n t h e a n a l y s i s , which a c companies t h e a p p l i c a t i o n , of t h e r e p o r t of t h e l a s t e x a m i n a t i o n of t h e a p p l y i n g hank. The Board f e e l s t h a t i t should have t h e "benefit of more d e t a i l e d comment f r o m t h e F e d e r a l r e s e r v e a g e n t s r e g a r d i n g t h e c o n d i t i o n of an a p p l i c a n t bank, t h e need of t h e community which i t s e r v e s f o r t r u s t powers, t h e c h a r a c t e r of i t s gene r a l management a n d , p a r t i c u l a r l y , w i t h r e f e r e n c e t o t h e t y p e of s u p e r v i s i o n which w i l l "be g i v e n t o t r u s t a c t i v i t i e s i f and when a u t h o r i z e d "by t h e Board. The Board r e q u e s t s , t h e r e f o r e , t h a t t h e F e d e r a l r e s e r v e a g e n t s h e r e a f t e r supplement each such r e p o r t w i t h a s t a t e m e n t a s t o t h e r e a s o n s f o r t h e recommendation made, and s p e c i f i c i n f o r m a t i o n a s t o t h e q u a l i f i c a t i o n s and e x p e r i e n c e of t h e p e r s o n or p e r s o n s s e l e c t e d t o d i s c h a r g e t h e d u t i e s of t r u s t o f f i c e r i n t h e a p p l i c a n t "bynk. Very t r u l y y o u r s , E. M. McClelland, Assistant Secretary. Enclosure. TO ALL F . R. AGENTS. 439 350 COPY September , 1915. F e d e r a l Reserve A g e n t , S i r : By d i r e c t i o n of t h e Board t h i s l e t t e r i s s e n t f o r your g u i d a n c e i n p a s s i n g upon t h e a p p l i c a t i o n s of N a t i o n a l hanks f o r t h e p r i v i l e g e of e x e r c i s i n g t h e powers of t r u s t e e , r e g i s t r a r , e x e c u t o r and a d m i n i s t r a t o r . A l l a p p l i c a t i o n s from a p p l y i n g banks must he t r a n s m i t t e d f i r s t t o t h e F e d e r a l Reserve Agent of t h e d i s t r i c t i n which t h e "bank i s l o c a t e d , who w i l l forward t h e a p p l i c a t i o n s w i t h h i s recomm e n d a t i o n s , t o t h e F e d e r a l Reserve Board. The F e d e r a l Reserve Agent i n making h i s recommendations i s expected t o t a k e i n t o cons i d e r a t i o n t h e g e n e r a l s t a n d i n g of t h e h a n k , c h a r a c t e r of i t s management and i t s f i t n e s s t o e x e r c i s e t h e f i d u c i a r y powers a p p l i e d f o r , a s w e l l a s t h e b e n e f i t s t h a t t h e community i n which t h e hank i s l o c a t e d w i l l he a p t t o r e c e i v e from t h e e x e r c i s e of such powers hy t h e h a n k . S p e c i a l weight w i l l he g i v e n by t h e F e d e r a l Reserve Board t o t h e a p p r o v a l or d i s a p p r o v a l of t h e F e d e r a l Reserve Agent. A p p l i c a t i o n s t h a t a r e recommended by him f o r a p p r o v a l w i l l h e r e f e r r e d hy t h e Board t o a committee which, a f t e r a c a r e f u l examination of t h e r e c o r d s on f i l e i n t h e o f f i c e of t h e Comptroller of t h e Currency r e l a t i n g t o t h e b u s i n e s s and t h e management of t h e bank, w i l l r e p o r t t o t h e Board f a v o r a b l y or m&marsely, a s t h e c a s e may b e , upon the application. _3_ 350 ^ 8 0 I n a d d i t i o n t o t h e p o i n t s above o u t l i n e d , t h e B o a r d ' s comm i t t e e c o n s i d e r s t h e s t r e n g t h of t h e bank a s shown by i t s s t a t e m e n t s and by t h e e x a m i n e r ' s r e p o r t s , and e s p e c i a l weight i s a t t a c h e d t o t h e observance on t h e p a r t of t h e bank of t h e r e q u i r e m e n t s of law and of t h e r e g u l a t i o n s and admonitions which a r e s e n t o u t ' f r o m time t o time by t h e C o m p t r o l l e r ' s o f f i c e . I t i s n o t , a s r u l e , deemed a d v i s a b l e t o g r a n t p e r m i t s f o r t h e e x e r c i s e of f i d u c i a r y powers t o a N a t i o n a l bank, (1) Where i t s s u r p l u s does not amount t o a t l e a s t 20$ of i t s capital stock; (2) Where r e p o r t s show t h a t i t i s c a r r y i n g an e x c e s s i v e amount of p a s t due or d o u b t f u l p a p e r ; (3) Where i t i s c a r r y i n g r e a l e s t a t e l o a n s not a u t h o r i z e d by law; (4) Where i t i s shown t h a t t h e bank i s i n t h e h a b i t of granting excessive overdrafts continuously; (5) Where t h e l o a n s of t h e bank a r e not well d i s t r i b u t e d , by r e a s o n of an e x c e s s i v e p r o p o r t i o n of t h e t o t a l l o a n s having been g r a n t e d t o a few i n t e r e s t s or where l o a n s made t o o f f i c e r s and d i r e c t o r s a r e t o o l a r g e i n p r o p o r t i o n t o t h e t o t a l amount of l o a n s , or a r e not w e l l s e c u r e d . (6) Where t h e examiners have r e p o r t e d t h a t t h e d i r e c t o r s do n o t d i r e c t or a r e l a x or n e g l i g e n t i n t h e i r a t t e n d a n c e a t Board meetings or i n g i v i n g a t t e n t i o n t o t h e b a n k ' s management and d i r e c t i o n . F e d e r a l Reserve a g e n t s , i n making t h e i r recommendations, a r e e x p e c t e d t o pay p a r t i c u l a r a t t e n t i o n t o t h e s t r e n g t h of t h e management of t h e bank from a moral s t a n d p o i n t , and s h o u l d d e c l i n e t o recommend any a p p l i c a t i o n where t h e y f e e l t h a t t h e o f f i c e r s of t h e bank a s i n d i v i d u a l s , would not be worthy of b e i n g e n t r u s t e d w i t h t h e management of t r u s t f u n d s or t h e a d m i n i s t r a t i o n of e s t a t e s . Respectfully, Secretary. \
@FedFRASER