Proposal would require FDIC consent for state savings associations to exercise trust powers

The federal agency that insures bank deposits is proposing to eliminate regulations written by a long-departed federal thrift regulatory agency regarding state savings associations’ exercise of trust powers. The proposal would also bring state savings associations under an FDIC requirement that, in certain circumstances, requires state nonmember banks to obtain the agency’s prior consent to exercise such powers.

The proposal, by the Federal Deposit Insurance Corp. (FDIC), notes that the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) provided for the elimination of the former Office of Thrift Supervision and divided certain responsibilities of that office among the FDIC, with respect to state savings associations; the Office of the Comptroller (OCC), with respect to federal savings associations; and the Federal Reserve Board (Fed), with respect to savings and loans associations. It also granted the OCC rulemaking authority relating to both state and federal savings associations. However, the FDIC says nothing in the act affected its own authority to issue regulations under the Federal Deposit Insurance Act and other laws as the “appropriate Federal banking agency” or under similar statutory terminology, and it says the act included state savings associations in the list of institutions for which the FDIC is the appropriate agency.

If finalized, the FDIC’s proposal would eliminate the former OTS rules (part 390, subpart J of the Code of Federal Regulations [CFR]) and bring state savings associations under current FDIC rules (parts 333 and 303 of the CFR) addressing prior consent for state nonmember banks to exercise trust powers.

The proposal stipulates, however, that similar to state nonmember banks, under the proposed rule, state savings associations would not be required to receive the FDIC’s prior written consent to exercise trust powers in the following circumstances:

(1) Where the institution received authority to exercise trust powers from its chartering authority prior to Dec. 1, 1950; or

(2) Where 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 FDIC proposal, out for a 60-day comment period, is scheduled to appear in the Federal RegisterTuesday.

FDIC Proposal: Transferred OTS Regulations Regarding Fiduciary Powers of State Savings Associations and Consent Requirements for the Exercise of Trust Powers