1 Trust & Asset Management Oversight Office of Thrift Supervision FIRMA National Risk Management Training Conference April 9, 2008

2 Contact Numbers Judi McCormick Director, Trust & Specialty Programs Washington DC (202) John Rudolph Trust Policy Specialist Washington DC (202)

3 Contact Numbers Tara French Northeast Region – Jersey City NJ (201) Paul W. Kelly Midwest Region – Dallas TX (972) Lazaro Barreiro Southeast Region – Atlanta GA (404) Kevin Swanson West Region – Daly City CA (650) Neal O’Brien Central Region – Chicago IL (312)

4 Governing Rules & Regulations Home Owners Loan Act (HOLA) - Section 5(n) (12 U.S.C. § 1464(n)) Authorizes fiduciary powers for thrifts OTS Regulation – 12 C.F.R. 550  Defines fiduciary capacity  Describes how to get fiduciary powers  Grants exemptions for certain activities  Addresses the proper exercise of fiduciary powers  Provides for the surrender or revocation of fiduciary powers

5 When Do You Need Fiduciary Powers? Generally, when you act as: Trustee Executor or Administrator Registrar of stocks and bonds Transfer Agent Assignee Receiver Guardian or Conservator Fiduciary under Uniform Gifts/Transfers to Minors Acts Investment adviser for a fee Any capacity where you have investment discretion

6 When Can You Act Without Fiduciary Powers? Generally, when you act as: Trustee of your own employee benefit plan Trustee/Custodian of self-directed IRA’s, Roth IRA’s, Health/Medical Savings Accounts, or Education Savings Accounts Agent, Custodian, Escrow Agent, or Safekeeping Agent with no investment advice or discretion (If you have any question as to whether fiduciary powers are needed, contact the Regional OTS Office responsible for your supervision)

7 When Can You Act Without Fiduciary Powers (con’t) ? Examples of activities include: Networking arrangements Underwriting securities Private banking/wealth management (May incorporate activities requiring fiduciary powers) Back office support for mutual or hedge funds Sweep arrangements into money market mutual funds (If you have any question as to whether fiduciary powers are needed, contact the Regional OTS Office responsible for your supervision)

8 What’s Driving The Trust and Asset Management Business??  Aging Baby Boomers!!  80 million of us who remember (and have now gone back to) AM radio; who’s first car was a used Pinto, Chevette, or Gremlin; and who still have 8-tracks in a box in the basement, will start to retire over the next decade or so  We will have $13 trillion to go into trusts, IRA’s, investment management accounts, and custodial accounts

9 OTS Supervised Institutions RegionTrust-Only Thrifts Trust Departments of Thrifts Northeast 623 Southeast 214 Central 620 Midwest 315 West 310 Total1982

10 Trust Assets in OTS Supervised Institutions (12/31/07) RegionTrust-Only Thrifts ($ millions) Trust Departments of Thrifts ($ millions) Totals ($ millions) Northeast 255,321229,580484,901 Southeast 90127,56628,467 Central 41,19968,755109,954 Midwest 15,6199,95825,577 West 179,67031,195210,865 Total 492,711367,052859,764

11 Trust-Only Institutions An institution with a thrift charter restricting activities to trust and related functions Exempt from the requirements of CRA – 12 C.F.R. 563e.11(c)(2) Generally maintain a deposit of $500,000 to qualify for federal deposit insurance Must meet the QTL test and so they generally maintain their $500,000 deposit in mortgage- backed securities.

12 Trust-Only Institutions Trust-Only Institution exams are focused on the trust and asset management activities but include review of the limited banking activities performed Both CAMELS (bank) and MOECA (trust) ratings are assigned

13 Trust Exam Frequency Trust department and trust-only institution exam frequency guidelines were revised in October 2007 Generally : The trust department exam should be performed closely in time to the thrift exam so that significant findings or concerns can be reflected and addressed in the overall assessment of the thrift and factored into its CAMELS rating The exam schedule for trust-only institutions continues to be driven by the statutory examination requirements for thrift examinations – generally once every 18 months CAMELS and MOECA ratings, management or business line changes, changing financial condition, and other factors may impact the scope and frequency of exams

14 Trust Exam Scope All the traditional risk-focused trust and asset management exam guidelines for trust departments and trust-only institutions remain You may see trust examiners venturing into other areas not traditionally in their trust exam scope, e.g.: Private banking/wealth management activities IRA, HSA, and other similar relationships administered in the bank Municipal and Government Securities Dealer and Transfer Agent activities performed in the thrift or holding company – CEO Memo 258

15 Topics for Discussion To be finally determined closer to conference date, but will likely include: First - brief discussions of: Reg R CEO Memo 258 The expanding role of the OTS Trust Examiner Outsourcing and the use of 3 rd party service providers Conflicts of interest and self-dealing when using affiliates or otherwise-related entities Then: Any questions you have that are of general interest for the group - I’ll tell you whatever I know!