NR 96-148
December 30, 1996

 OCC Issues Final Rule on Fiduciary Activities of National Banks 

WASHINGTON, D.C. -- The Office of the Comptroller of the Currency
(OCC) published a final rule in today's Federal Register that
revises its regulation governing fiduciary activities of national
banks, including collective investment funds.  

"This regulation completes the comprehensive review of our
regulations that we began over three years ago," said Comptroller
of the Currency Eugene A. Ludwig.  "Our goal was to update and
streamline our regulations and to eliminate unnecessary
regulatory burden that does not contribute to the safety and
soundness of national banks.  That goal has now been achieved.  I
am proud of the efforts of so many dedicated people at the OCC
who performed this review that will benefit national banks and
the customers they serve."

Today's final rule on fiduciary activities marks the first time
since 1963 that the regulation has been updated in its entirety. 
Today's rule accommodates the significant changes that have
occurred in the fiduciary business of national banks since 1963,
including banks' ability to do business on a multistate basis. 
The OCC has modified the rule's requirements to be more workable
for both large, multistate fiduciary banking organizations and
small banks that conduct fiduciary activities primarily on a
local basis.

DEFINITION OF A FIDUCIARY ACTIVITY

The final rule provides a more specific identification of the
fiduciary activities that are covered by the regulation.  The
fiduciary activities rules apply if the national bank serves in
specified traditional capacities and is engaged in an activity
where it exercises investment discretion.  Additionally, the
rules apply if a national bank provides investment advice for a
fee.  If a national bank does not have investment discretion,
does not provide investment advice for a fee and does not serve
in one of the specified traditional fiduciary capacities, such as
trustee or executor of an estate, the regulation does not apply
to that activity.

MODERN FIDUCIARY OPERATIONS

The final rule modernizes provisions relating to fiduciary
operations.  For example, the rule permits an audit committee of
an affiliate to serve as a national bank's fiduciary audit
committee.  This change facilitates centralization of fiduciary
audit functions and accompanying efficiencies within a bank
holding company structure.  The rule also allows a national bank
to use personnel and facilities of affiliates to perform services
related to the exercise of its fiduciary powers, and allows the
bank to enter into agency agreements with other entities to
purchase or sell services related to the exercise of its
fiduciary powers.  These changes allow banks to centralize
fiduciary-related services, or to outsource them, where
appropriate.  Moreover, the rule provides an exception to the
collective investment fund "exclusive management" requirement to
allow a bank to prudently delegate responsibilities to others. 
This exception is consistent with modern fiduciary principles, as
evidenced in the prudent investor rule, and allows a bank to
serve its customers more efficiently and effectively.

PLEDGING FOR FIDUCIARY DEPOSITS

When fiduciary cash is awaiting investment or distribution, a
national bank may deposit the funds in its deposit account if the
national bank pledges bank assets to secure the deposit. 
However, the previous regulation did not allow a national bank to
pledge assets to secure a similar deposit by an affiliate bank
such as a trust bank without deposits.  The final rule permits a
national bank to pledge assets to secure deposits of fiduciary
cash awaiting investment or distribution with an affiliate when
not prohibited by applicable law.  This standard allows a state
to prohibit this practice for all fiduciaries in the state,
including national banks, yet gives a national bank flexibility
for its fiduciary operations in states that do not choose to
impose this prohibition.  This change will facilitate more
efficient fiduciary operations in multi-bank holding companies.

COLLECTIVE INVESTMENT FUNDS

Advertising 

The final rule retains the existing OCC interpretation that
national banks cannot advertise the performance of common trust
funds except in connection with the advertisement of the general
fiduciary services of the bank.

Management Fees

The previous regulation allowed a national bank administering a
collective investment fund to charge a management fee if the fees
charged do not exceed the total fees that the bank would have
charged the fiduciary account if it had not invested assets of
the account in the collective investment fund.  The final rule
allows a national bank to charge a fund management fee only if:
(1) the fee is reasonable; (2) the fee is expressly permitted
under applicable law (and the bank complies with disclosure
requirements, if any) in the state in which the bank maintains
the fund; and, (3) the amount of the fee does not exceed an
amount commensurate with the value of legitimate services of
tangible benefit to the fiduciary account that would not have
been provided to the account if it were not invested in the fund.

Limits on Investment and Participation

The final rule eliminates the previous limit on common trust
funds, a type of collective investment fund, that limited one
account to no more than 10 percent of a fund. The final rule also
eliminates the limitation that one investment cannot represent
more than 10 percent of the investments in a common trust fund. 
The limits are unnecessary, the OCC noted, because state
fiduciary law that obligates all banks to act in the best
interests of their customers is adequate to ensure proper
investment concentrations in common trust funds.  

MULTISTATE FIDUCIARY OPERATIONS

The final rule also reflects the prior OCC legal interpretation
that national bank fiduciary powers are the same for out-of-state
national banks as for in-state banks.   The rule's approach to
multistate fiduciary activities recognizes that national banks
will increasingly conduct fiduciary business in multiple states,
and puts national banks on a par with competing fiduciaries in
the states in which they operate.  

                              # # #

The OCC charters, regulates and supervises approximately 2,800 national banks
and 66 federal branches and agencies of foreign banks in the U.S., accounting
for more than half the nation's banking assets.  Its mission is to ensure a
safe, sound and competitive national banking system that supports the
citizens, communities and economy of the United States.