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W. P. G. HARDING, GOVERNOR
ALBERT STRAUSS, VICE GoV!RNOR
EX·OFP'ICIO MEMBERS
ADOLPH C. MILLER
'"'AMLIN
WILLIAM G. McADOO
SECRETARY OF THE TREASURY
CHAIRMAN
CHARLES S.
>"")I")
,;·
JOHN SKELTON WILLIAMS
FEDERAL RESERVE BOARD
COMPTROLL!R 01" THE CURRENCY
,..
~
J. A. BRODERICK, SB:RETARY
L. C. ADELSON, ASSISTANT Sf.CRETAit-Y
W. T. CHAPMAN. ASSISTANT SECRETARY
W. M. IMLAY, FISCAL ~ENT
WASHINGTON
ADDftESS REPLY TO
FEDERAL RESERVE BOARD
November 26 1 1918.
X-1287
SU~.JECT:
Proposod Rovision 1 Regulation F 1
~.erias
of 1917.
Dear Sir:
The arr.endrr.ent to Section 11 (k) of the Fodcr'-"1 .Fw.;erve Act
contained in Section 2 of the Act approved Septorrbor 26 1 1918 1 rr.akos
i t necessary for the Federal Reserve :Woard to revise Regulation F 1
Series of 1917 1 which J.eals with trust powers of nZt.tional banks.
Several. very in.portant :;;.nd very close legal quest ions are
involve:i ?..nd rrust be dealt with in adopting this nevi/ regulation.
Letters received fron~ son.e of the Counsel of the Federal reserve banks
indic?..te that there is a differenee of opinion as to the proper interpret&tion of the recent Act of Congress amending Section 11 (k)
and that Counsel .3.re not agreed ~s to Nhat powers rray be granted +o
national banks in those States tho laws of Nhich do not clearly define
or enurr.erate the trust po 1ers th;;ct t:ay be exercise& by corr.pet'ing_ St3.te
corporations. It is also obvious that a nurr.ber of questions will arise
in connection Nith the exercise of trust po·.~Vers by national banks :dter
the perrr.its :;~.re gn.nted and sorr.e of thes2 qllest:i.ons should be dealt
t'lith in the regulations_prescribe:i by the Board.. In preparing this
regulation 1 therefore 1 I should like to have tho benefit of the vie·Ns
of Counsel for the several Federal reserve banks :~.nd ;rill gres:. tly
appreciate your ~dvise and assistance in this irrportant rr.atter.
I am sending you copy of the Act of Septenl:ler 26.,1918., of the
Regulations of the ~oard 1 and am also enclosing merr.orandum outlining
son:e of the problems th:::.t n:ust be dealt with in preparing the regulation under consideration.
I Nill be glad if you will wire rr.e upon receipt of this
Nhether in your opinion the ':o:1.rci. should hold up the granting of all
perrr.its until the regulations are issued 1 and a.s soon ~s you can conveniently do so if you will let rr,e have any suggestions that you will
be kind enQugh to make.
I c..n. also anclosing tentative dnft of new regulation Nhich
is intended prirr~rily to present in concrete form sorr.e of the questions
which should be ietennined.
With best wishes 1
4 3nclosures.
Counsel.
X-1287 a
l'J"E},!OFJ'"NDUM IN RE PROPOSED REGULATIO~~ DEALING ''JITH THE
GRANTING TO AND EXERCISE OF TRUST PO"'ERS BY
NATIONAL BANKS.
. . . oooOooo. .
CON~TRUCTION PLACED UPON SECTION 11 (k)
AS ORIGINALLY ENACTED.
Section 11 (k) ~s originally enacted authorized the Federal
Reserve Board -
'rTo grant
·Nhen not in
as trustee,
bonds under
rt;
by special permit to national banks applying therefor1
contravention of State or local laN 1 the right to ::ct
executor 1 administrator 1 or r~gistrar of stocks and
such rules and regulations as the said Board rr:ay prescribe.
therefore 1 becarr.e necessary for the Board to determine when
the granting of the potvers enumerated ·Nould be
11
in contravention of State
or local law". Opinion of Counsel differed on this subject. Some adopted
the view that no permit should be granted where the exercise of such
po
·1ers by national banks would contravene the "policy" of the State, that
is to say 1 where corporations exercising conn:ercial banking po·wers were
not permitted under the laws of the State to exercise fiduciary poNers,
the opinion
w~s
expre3sed that to grant to national bc:.nks the rj_ght to
exercise such po;vers would contravene the laws of the State. Others
adopted the view that perrr.its should be granted in any case in Nhich the
laws or statutes of the State li:i not prohibit the exercise of trust
poNers by national banks.
The Board 1 after fully considering the matter 1 adoyted the policy
of granting permits to national banks unless the laws of the State
expressly or by necessary implication prohibited the exercise of trust
po-Ners by national banks.
11
X-12.87 a
TEST CASE.
Under the laws of Michigan trust companies were not permitted
to engage in the business of corr.rrercial banking and corrrr:ercial banks
vere not specifically authorized to do a trust company business. There
was no statute in Michigan, however.-: which in the o:pinion of ths Board
ex:presc.;ly or by necessary implication prohibited national banks from
exercizing trust po.vers. The Board accordingly granted a pern:it to the
First
Nation~l
Bank of Bay CityJ Michigan. At the instance of certain
trust companies the Attorney General of :Michigan instituted proceedings
in the nature of quo warranto against this bank and petitioned the Court
to enjoin it from exercising trust powers.
On the trial of this case two issues were presented, (1) whether
or not the exercise of trust poNers by national banks would contravene
the laws of Michigan, and (2) whether or not Section 11 (k) of the
Federal Reserve Act
W:iS
constitutional.
The Suprerr.e Court of 1cichigan decided that the exercise of trust
poNers by national banks 'Nould not contravene the laws of
~hchigan 1
thus
in effect sustaining the construction placed upon this Act by the Federal
Reserve Board. The Court> hoNever) held that Section 11 (k) was unconstitutional. On appeal to the Supreme Court of the United States the constitutionality of the Act was sustained and the Michigan Court was reversed
on this point.
While the United States Supreme Court was not called upon under these
circurr:stances to determine whether the lavvs of Michigan would be contravened
by the exercise of trust po;vers by national banks) in the course of its
opinion it discussed the purpose of Congress in granting these powers to
-3-
X-1287 a.
national banks and its reason for authorizing; the Board to grant pernits
to exercise these powers only when their exercise would not contravene
the laws of the State.
In referring; to the considerations that clearly ware in the legislative mind when it enacted Section 11 (k)J the Court having; announced
its reasons for re¥ersing the Michigan Court on the question of the
constitutionality of the .Act, goes on to say "This result would seem to be plain when it is observed
(a) that the statute authorizes the exertion of the particular
functions by national banks when not in contravention of the
State law, that is, where the right to perform them is expressly
given by the State law cr what is equivalent is deducible from
the State law because that law has given the functions to State
banks or corporations whose business in a greater or less degree
rivals that of national banks, thus engendering from the State
law itself an implication of authority in Congress to do as to
national banks that which the State law has done as to other
corporations .. 11
This language of the Court seemed to justify the opinion that it was
intended as a definition of the provision "when not in contravention of
Sta:te of local law" and that under authority of this part of the decision
the Board might grant permits to national banks to exercise trust powers
~
.flhenevor such powers were enjoyed by competing State corporations 1
~ven
though the State lav'l expressed or by necessary implication prohibited
the granting of such permits.
The qv.estion, therefore 1 arose whether the Board could grant trust
powers to national banks in New York. Under the laws of that State all
corporations except those organized under a particular chapter of its
banking lawsJ were prohibited
con::panies in
Ne~v
f
ron:: exercising trust po,vers. The trust
York were actively engaged in the conn.ercial banking
business and were among the most active competitors of national
b~nks.
The question was subn::itted to the Attorney General of the United States
X-1287 a
-4-
who held in e.ffect that while Congress had 'the power to provide that
per~its
might be granted to national banks in any case in which competing
State corporations exercised similar
powers~
even though the State laws
prohibited the granting of such powers) Section 11 (k) as originally
)
enacted was not intended to vest this power in the Federal Reserve Board.
It was to clear up this situation that the following provision was incorporated in the amendu:ent of September 26J 1918:
"Vv'henever 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 .. "
While this was intended to enable the Board to grant permits even
in those States in which the State law expressly prohibits corporations
ether than these organized under such law to exercise trust powers) it is
realized that under the ordinary rules of statutory construction this
provision may be treated as a definition by Congress of the language "when
not in contravention o:f State or local law.
~n
this view it rray have the
ef feet of restricting rather than broadening the Board 1s power to grant
pennits.
In other words; i i the Board can grant permits only in those cases
where competing State corporations exercise similar
powers,~
the policy
of the State in dealing: with corporate trustees rr.ay becorr.e the determining
fact9r rather than the laws or statutes. In support of this view it rray be
argued that prior to· this amendment the Board was left ln a sott.ewhat
anomalOus position. A State SupreiLe Court had determined that trust poNers
might be granted to na.t:i.onal banks by the Federal Reserve Board unless to
do so would contravene some specific law or statute of the State.
X-1287 a
-5-
On appeal to the United States Supreme Court that Courrt had recognized the right of the lower court to determine thi'l quest ion ar1d had
reversed the loNer court on an entirely
di:~fe~"ent
ground. In discussing,
lwvvever, the purpose of Congress in passing this statute) the United
States Suprer:.e Court had clearly indicated that this purpose was to
coordinate the powers of national banks Nith those of corr.pet ing State
curporations. This being true, it rray be a~_',&"Uecl. that
Congress did not
intend to authorize these perrdts to be granted unless coUJpeting corporations exercise similar powers 1 and the conclusion may be justified that
Congress intended by this amendrr.ent to clear up any ambiguity <iln this
subject and to confirm the position taken by the Supreme Court as to the
intention of Congress in originally enactL~g Section 11 (k).
POSERS THA'I' V!A Y BE GRANTED UNDER
SECT I ON ll {k ) •
The Board is now called upon to determine this question and to
:.iefinitely decide what powers tray be granted to national banks under the
arr.ended .Act. It :roust.J therefore 1 determine the following questions:
(l) In granting trust powers to a national bank is the Board limited
to those powers which competing State corporations under the State law are
authorized or permitted to exercise?
(2) Does the qualification that competing State corporations rr.ust
exercise similar powers apply to the granting of permits to act as trastee 1
executor) administrator, and other powers expressly enumerated in the i irst
paragraph of Section ll (k), or does it apply only to that part of the
first paragraph which authorizes the Board to grant these permitS to
national banks to act '' in any other fiduciary capacity" in which such
competing corporations are permitted to act under the State laws?
(3) Was the second paragraph of Section 11 (k) Nhich ha~ been dis.cu.ssed
intended as
a definition of the language
11
when not in contravention of
X-1287 a
-6-
-~;
-;
State or local la'N 11 or was it intended only to g1.ve the Board the right
to grant these powers Nhen not in contravention of Sta.te or local law
even though the St:-:cte law rr:ay prohibit any other corporation except its
own f-rorr, ex ere ising such poNers 1
These questions relate to the same subject
~atter
and in a sense
rray be said to be the sarre question expressed in three different forrrs,
my purpose however is to emphasize the fact that these
areicOnfl~~ting
view points ..
PEID!.ITS HERETOFORE GRANTED.
The Board is also called upon to determine the status of perrrits
heretofore granted. Section 11 (k) as originally enacted did not fix
the
a~ount
of capital and surplus that a national bank rr.ust have in order
toprocure a permit. Perrr,its have accordingly been granted in some cases
to banks having less capital and surplus than State institutions are
required to have under the State
l~N.
The question ,
therefore~
arises
vVhether the armndrr,ent to Section 11 (k) which novV" requires national banks
to have the capital and surplus of corr,peting S+-ate institutions can be said
to revoke thase permits?
If such pemits are not revoked by the affiendment,.. can '::tnd should tho
Federal Reserve Board prohibit such banks from assuming any further trust
relations as a rratter of regulation and prescribe as a penalty the revocation of such p3rrrits on the ground that the assumption of further trust
relations would constitute a violation of State la.Ns rr.ade applicable to
national banks by the recent
atten~roent
to Section ll (k).
. . J.
.
-7On
thi~
X-1287 a
point it will be observed that the Board in its regulations
~n
...
''
~·
reserved the right to revoke pennits_ for violation of State laws ..
INVESTW£NT OF TRUST FUNDS.
One of the most difficult and intricate questions the Board is called
upon to decide is how far it is authorized to prescribe the class and
character of investments that rray be rrade of trust funds; to what extent
State laws should govern, and to what extent this should be left to the
discretion of
th~
officers and directors of national banks. The statutes
of the several States are not uniform on this subject. In some States the
l~Hs
expressly enumerate certain investments that rray be made of fiduciary
funds.
rn·the case of court trusts it is custorrary in some States for such
investments to be rrade under order of court. The discretion vested in
the trustee is broader in
sorre cases than in others. It is desirable that
the Board should adopt appropriate safeguards to protect the interest of
the beneficiaries of trust estates and that it should require investments
to be made to be of a certain standard but the Board should not 1 of course,
undertake in each case to prescribe or pass upon the specific h1Vestments to
be madeIn this connection the folllwing questions suggest themselves:
(1) When the instrurr.ent creating the trust expressly vests in the
trustee an unrestricted discretion in the matter of investments and reinvestments 1 should the Board by regulation undertake to prescribe the
character or standard of investments that may be made?
(2) Where the ins'trurr:ent creating the trust does not expressly vest
such a discretion in the trustee but does not contain any provision limiting
or qualifying the character of investments that may be rrade, should the
Federal Reserve Board by regulation prescribe the character or standard
of investments?
~
X-1287 a
-8-
(3) Where the national bank acting in a fiduciary capacity j_s
appointed by or qualifies before a Probate
'
Court~
should investrLents be
rr.a.de under order of court 7
(4) If the order of court expressly gives a general discretion to
the national bank to invest and reinvest
funds~
should the Federal Reserve
Board prescribe the character or standard ct investments to be rrade?
(5) If the order of court does
not prescribe the character or
standard of investments that rray be rrade and does not expressly leave
this to the discretion of the national bank but the laws of the State
specify and describe the investrr.ents that rray be rrade of fiduciary funds;
should the Federal Reserve Board require its approval of the investments
enumerated
or described in the laws of the State?
CONSIDERATIONS OF
It is believed that the character of
P~ICY.
re~<lations
adopted by the
Board Nill have an important bearing upon the successful development of
the business of the trust departments of national banks. The fact that.
appropriate safeguards are adopted for the protection of the beneficiaries
of trust estates and that this class of business is carefully supervised
'.
by the Federal Reserve Board should prove an inducement to
t.hs~fJ ~~1.strt4t...~
a trustee or other fiduciaries to select national banks. On the other hand,
unless the Board requires national banks opening trust departments to
operate these departments along conservative lines, and unless it requires
such banks to open and rr:aintain an accurate set of books and records)
there is danger of confusion as between the corr,nercial department and the
trust department of the bank~ and of resulting complications that rray
prejudice the development of both
depart~ents.
It is desirable,therefore, that the Board should by regulation safeguard the interest of the beneficiaries as fully and completely as it can
under existing laws~
...
..
Regulation F
Series of 1918
~
...... TRUST POWERS OF NATIONAL B.',NKS •......
1. Statutory Provisions.
The Federal Reserve .1ct, as a.rr.ended by the Act of Septerr·ber 2611918J
provides in part:
Sec. 11. Th.e Federal Reserve Board shaJ.l be authorized and empovvered "(k) To grant by special permit to national banks applying therefor1 1vhen not in contravention of State O!! local law1 the right to act as
trustee, executor., administrator, registrar of stocks and bonds, guardian
of estates 1 assignee~ receiver 1 corrrr.ittee of estates of lunatics 1 or in any
other fiduciary capacity in which State banks, trust corr.panies, or other
corporations which come into competition with national banks are pemitted
to act under the laws of the State in which ·~& ..n~U..onal bank is locatt'ld.
'
"Whenever the laws of such State authorize or permit the exercise
of any at aJ.l of the foregoing poNers by State banks 1 trust corr,panies, or
other corporations which compete with national banks, the granting tc and
the exercise of such powers by national banks shall not be deemed to be
in contravention of State of local law within the rr.e·aning of this Act.
"National banks exercising any or all of the powers enun:erated
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 bock~
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 sarr.e 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 1 recordsJ 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 1 drafts 1 bills of
exchange 1 or other items for collection or exchange purposes. Funds deposited
or held j.n 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 FedGral Reserve Board.
"In the event of the failure of such bank the o·Mlers of the funds
held in t~st for invest~ent 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 do,;:osit securities with the State authorities fer tho
protect ion of private or court trusts) national banks so acting shall 1'-e
required tm rrake sirr~lar deposits and securities so deposited shall_ be held
for the protection of private or court trusts, as provided by the ~tate law.
-Z-
X-1287 .b
"National banks in such cases eha~l 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 wake an affidavit, the president ..
vice president, cashier,~ or trust officer of such national bank way take the
necessary oath or execute the necessary affidavit.
'1
"It shall be unlawful for any national banking association to land any
officer, director, or employee any funds held in trust under the powers
conferred by this section. Any officer, director 1 or employee rr.aking such
1Qan 1 or to whom such loan is made 1 rr.ay be fined not more than $5 1 000, or
imprisoned not rr.ore 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 1 the Federal Reserve Board rray take into
consideration the amount of capital and surplus of the applying bank,
Whether or not such capital and surplus is sufficient under the circu~stances
of the case) the needs of the corrrrunity 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 eo~panies 1
and corporations exercising such powers. 11
11
n.
'
, PERMITS GRANTED PRIOR TO ACT OF SEPTD"BER 26 1 1918.
(a) 12. banks having eapital ~ surplus required .Q!. State .£!!1£.!!. ~ trust
cotr;panies exercising similar powers ..
The perrrits granted to national banks having capital and surplus
required of State banks and trust corr.panies exercising similar
fiduciary powers shall renain in force. No new applications for
permission of the Federal Reserve Board need be filed unless the
bank holding such permit desires to exercise additional powers
not contained in the pennit granted.
(b) !,2. ~ having capital ~ surplus ~ ~ 1!'!s:.1 required .21 State
~~..§. ~ i.~t ~atanies ~ercising fiduciary p(;.lwers.
A perrr.it heretofore granted to a national bank having capital and surplus
less than that required of State banks and trust companies
exercising fiduciary povifers shall continue in force only in so
far as it affects trust relations heretofore assu~edr Such
national bank should not assume any new or additional trust
relations afte~ this date unless and until its capital and
surplus h.:1ve been increased to the amount required of State
banks and trust companies exercising fiduciary powers} in the
place in which the national bank is located.
II
Origipal A~plication
Digitized for (a)
FRASER
APPLICATIONS FOR PERMITS.
A national bank which has not heretofore been
X-1287 b
..._
'
granted a pemit to exercise any trust powers desiring to exercise any or
all of the powers authorized by Section 11, su~,scction (k) 1 of the Federal
Reserve Act 1 as amended by the Act of September 26 11918, shall make
application to the Federal Reserve Board on a form approved by said Board
(Form No. 61-a). Such application shall be for.varded by the applying bank
to the chairman of the Board of directors of the Federal Reserve bank of its
district 1 and shall thereupon be transmitted to the Federal Reserve Board
for its action ..
(b) Supplementary Applications-- A national bank Nhich has heretofore
been granted permis3ion to exercise any or all of the fiduciary powers
enumerated in Section 11 (k) as originally enacted 1 desiring to apply for
permission to exercise additional powers, shall make application to the
Federal Reserv0 Board on a form approved by said Board (Form No. 61 b).
Such application shall be for·Narded to the Federal Reserve Board in the same
manner as an original application.
(c) Pendinrl applications--· A national bank 1 whose application for permission to exercise trust powers was filed before the passage of the Act
of Septer ber 26 11918 1 if it desires to exercise 'the additional poNers
enurr,era.ted in Section 11 {kL as amended, rr.ay Nithdraw such application and
file a new application on Form 6la. If the original application is not withdrawn1 the Board will act upon. it as to the powers enurr.erated in such application1 and the applying bank rray later file a supplerrentary application for
the additional powers desired on Forffi 6lb.
(d) Anplic.a.tions Heretofore Refused-- A national bank whose application
for permission to exercise trust powers has heretofore been refused rnust
file a new application on Form 6la if it desires to exercise ary of the
powers enumerated in Section 11 (k) as amended~
IV.
PO!~RS
GRANTED.
In passing upon applications filed under this re~lation 1 the Board
Nill grant permission to exercise only those po·Ners which State banks,
trust cou:panies., or other corporations which corm into competition to some
extent #ith national banks are authorized or permitted under the State
laws to exercise.
J '
V.
SEPARATE DEPARTlf.ENTS.
Every national bank permitted to exercise trust powers under these
re~lations shall establish a separate department and shall place such
department under thz rranagcment of an officer or officers whose duties shall
be prescribed by thJ Board of directors of the bank.
VI.
CUSTODY OF TRUST FUNDS.
The funds, securities, and investments held in each trust shall be kept
separate and distinct frorr: the general funds and securities of the bank and
separate and distinct frorr one anothsr.
VII.
INVE~TNENT
OF TRUST FUNDS.
Funds held in trust nust be invested in strict accordance Nith the
of
the
Nill 1 deed, or other instrurrent creating the trust.
tern~
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X-1287 h
',!\'here the instrument creating the trust contains provisions expressly
authorizing the officers or directors of the bank to exercise an unrestrictod
discretion in the matter of investments and re-investrrents, funds held in
trust rr4y be invested in any securities which are· approved by the directors
of the bank.
Where a national bank acting in a fiduciary capacity is not restricted
by the tenocs of the instrument creating the trust in the character or class
of investments to be rrade but the officers or directors of the bank are not
expressly vested with an unrestricted discretion in the rratter of investments~
funds held in trust may be invested as follcwa:
(1) In any securities specified or enumerated in tho laws of the State in
which the bank is located as securities in which fiduciaries rray
invest trust funds) provided 1 that the Federal Reserve Board shall
first approve the securities specified or enun,erated.
{Z) INhere ths laws of such State do not specify or enumerate the investments that rray be tr.ade of funds held in trust by fiduciaries
national banks rray invest such funds:
(a) in United States bonds or certificates of indebtedness;
(b) in faro lman bondsj
(c) in bonds issued by a municipality (the term 'rr.unicipality' being
construed to mean State 1 county, or cityL provided 1 such bonds
are general obligations of the rr.unicipality issuint them, and are not to be
paid from ~ocal benefit or special assessment taxes; provided; further 1 that
such bonds are issued by a ~unicipality which has been in existence for a
period of ten years, and for a period of ten yeats previous to such invest~ent has not defaulted for 10nger than fifteen days in the payment of any
part of either principal or interest of any funded debt authorized to be
contracted by it; provided, further, that the net funded indebtedness of
such municipality does not exceed ten per cent of the valuation of its taxable
property to be ascertained by the last preceding valuation of property for
the assessment of taxes.
(d) in notes or bonds secured by a first tLOtt:;age or deed of trust
on improved ,and othervdse unencumbered real estate located nithin the State
and within one hundred miles of the bank, provided the amount of loans secured
by such first n:ortf,a[e does not exceed fifty per cent of the value of such
real estate as appraised by an authorized conmittee of the bank;
(e) in any securities approved by the Federal Reserve Board in which
mutual savings banks or rr.utual savings associations are authorized to invest
under the laws of the State in 111hich the bank is lbca~ed.
~~ere the laws of the State in which the bank is located do not
prescribe invest.trents \lhich rray be rrade by n:utual savings banks or mutual
savings associations, such funds may be invested in any securities approved
by the Federal Reserve Board.
(3) Court Trust§!..'. A nationaJ bank acting as executor, administrator~ or
in any other fiduciary capacity; under appointment by a court of competent
jurisdiction, shall rrake all investments under order of court and copies of
all such orders should be filed and preserved. with the records of .the trust
'.department of the bank. If the court by eeneral order vests an unqualified
discretion in the national bank to invest and re-invest funds held in trust,
or 1 if under the lans of the State in which the bank is located. fiduciaries
appointed by the court are vested with such discretion, national banks so
Digitized forappointed
FRASER
rray invest in securities enumerated in subsection 2 of this regulaticn.
X-1287 b
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VIII. DEPOSIT OF FUNDS
~~AITING INVEST~~NT.
Funds received or held in the trust departrr.ent of a national bank awaiting investrr.ent rray be deposited in the conn.ercial department of a national
bank to the credit of the trust department 1 provided 1 the ·national bank first
delivereg. to the trust department bonds 1 notes, or other securities eligible
for investment under these regulations equal to the amount of such deposita
IX.
BOOKS ;.ND ACCOUNTS.
All books and records of the Trust Departn.ent ahall be kept separate and
distinct from other books and records of the bank. All accounts opened should
be so kept as to enable the national bank at any time to furnish infol'rr.ation
or reports required by the State authorities 1 and such book~t and reco.tds shall
be open to the inspection of svch State authorities.
Before or imrediately upon assuming any trust relation national banks
holding pemits trust ll'.ake provision for all necessary books and recor~s. Forms
used rr.ust be first approved by the Division of Audits and Exarr~nation of the
Federal Reserve Board.
X. EXAMINATIONS.
The exarr.iners appointed by the Comptroller of the Currency or designated
by the Federal ·Reserve Board, Nill be instructed to rrake a thorough audit
of the cash, securities, accounts, and investments of the trust department of
the bank at the same tirr.e that exarrdnation is rr.ade of the banking department.
•
XI.
CONFORNITY WITH STATE LNKTS.
Nothing in these regulations shall be construed to give a national bank
exercising the poNers enumerated in Section 11 (k) as arr:ended any rig}'lts and
privileges in contravention of the laws of the State in .vhich the bank is
located within the meaning of that language as defined in the Federal Reserve
Act.
XII.
REVOCATION OF PERraTs.
The Federal Reserve Board reserves the right to revoke permits granted
under these regulations in any case where in the opinion of the Board a bank
has ·;v-ilfully violated the provisions of these regulations or the laws of any
State relating to the operations of such bank when acting in any of the
capacities specified in ~ection ll (k) as amended.
XIII.
CHANGES IN RULES.
These regulations are subject to change by the Federal Reserve Board;
provided) however 1 that no such change shall prejudice obligations undertaken
in good faith under regulations in effect at the time the obligation was
assun:ed.
@FedFRASER