Full text of Mimeograph Letters and Statements of the Board : Letter From Secretary Morrill re Exemption of Member Banks Acting in Fiduciary Capacities From Liability, Number X-9250, Volume 42, Page 569

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

FEDERAL RESERVE B O A R D
WASHINGTON
A D E SO F IA C R E P N E C T
D R S F IC L O R S O D N E O
T EF D R LR S R EB A D
H E E A EE V OR

X-9250
June 28, 1935

SUBJECT:

Exemption of member banks
acting in fiduciary capacities
from liability

Dear Sir:
The Federal Reserve Board understands that in some instances
member banks acting in fiduciary capacities may have accepted appoint­
ments to act under agreements containing unwarranted provisions ex­
empting the banks or their officers, directors or employees from lia­
bility on account of their acts in the management and administration of
the trusts.

For example, it is understood that in some cases such pro­

visions are to the effect that the bank shall be liable only in the event
of gross negligence or wilful misconduct.
The Board would like to obtain such information as is avail­
able relating to the question whether it is ordinarily the practice of
member banks to act in fiduciary capacities under exemptions from lia­
bility which are substantially in excess of those exemptions to which
trustees are ordinarily entitled.

It is assumed that banks generally

use more or less standardized clauses in forms used in connection with
their various classes of trust business, and you are requested to have




- 2 -

X-92S0

570

the examiners for the Federal Reserve bank, in connection with the next
examinationsof State member banks in your district, obtain copies of
the standard forms used by various banks in connection with the different
classes of trust business administered and information from each bank
as to any unusual provisions exempting the bank from liability which it
might be the practice to include in particular forms.

When the next

examinations of the State member banks in your district have been com­
pleted, please advise the Board in detail of the information developed
by the examiners together with the comments of the examiners and advise
the Board of your views as to what action by the Board, if any, would
seem to be desirable in the circumstances.

The Board, of course, would

be glad to receive any information which may be developed with regard
to any other provisions of trust agreements under which member banks
are operating which appear to be unwarranted and subject to criticism
and any suggestions you deem desirable with regard to any such provisions.
If, pending the completion of the next examinations of the State member
banks in your district, there should be a conference of trust examiners
for the Federal Reserve banks, it would seem desirable for such examiners
to discuss at that conference any unwarranted exemptions from liability
by trust companies which may have come to their attention with a view to
developing all information available with regard to existing practices
of fiduciaries in restricting their responsibilities as such fiduciaries.
Very truly yours,

Chester Morrill,
Secretary.
TO ALL FEDERAL RESERVE AGENTS