1 Regulator Panel FIRMA 25 th Annual Risk Management Training Conference April 19, 2011

2 Regulatory Consolidation

3 OTS Fiduciary Activities & Regulations OCC/OTS Consolidation – July 21, 2011 Fiduciary Powers – Thrifts vs. National Banks OCC - about 30% of national banks have fiduciary powers. OTS - about 10% of thrifts act as fiduciaries. OTS Fiduciary Regulations: In general, OTS regulations track OCC’s 12 CFR 9 One notable exception - certain fiduciary activities performed by a thrift do not require fiduciary powers. Examples: Acting as trustee of certain EB plans, or acting as an IRA trustee.

4 Where are all those Assets Invested?

5 Source: Preliminary 12/31/2010 Call Report data. Includes all national and state-chartered commercial banks and national trust banks. Fiduciary and Related Assets - All Banks 12/31/2010 Asset Management Statistics EB and retirement related accounts make up 50% of the fiduciary assets administered by banks.

6 Asset Management Statistics Source: Preliminary 12/31/2010 Call Report data. Includes all national and state-chartered commercial banks and national trust banks. Total Market Value of Collective Investment & Common Trust Funds Continues to Increase from 2008 lows.

7 Chart does not include investments in real estate, real estate mortgages and deposits since these represented 1% or less of total managed assets Source: Preliminary 12/31/2010 Call Report data. Includes all national and state-chartered commercial banks and national trust banks. Asset Management Statistics Managed Assets held in Fiduciary Accounts - All Banks 12/31/2010 Nearly one third ($1.2 trillion) of total managed assets held in fiduciary accounts ($4.1 trillion) are invested in bank CIFs and CTFs. Another $585 billion or 14% of managed assets are invested in mutual funds; $224 billion of that $585 billion is invested in proprietary mutual funds.

8 Source: Preliminary 12/31/2010 Call Report data. Includes all national and state-chartered commercial banks and national trust banks. Collective Investment Fund Assets All Banks 12/31/2010 Asset Management Statistics 57% or $1.3 trillion of total collective investment fund assets ($2.37 trillion) in 2010 were invested in domestic and international equities. This is up from the 55% of collective investment fund assets that were invested in domestic and international equities in 2009.

9 Regulatory Focus

10 Dodd-Frank and Related Issues Volcker Rule – organizing and offering hedge funds and private equity funds will face limits. Other D-F provisions that are likely to impact AM world: Money Market Funds/Shadow Banking Use of rating agencies in regulations Temporary FDIC insurance – transaction accounts New FDIC assessment rules/custody banks SEC “fiduciary standard” RIA Custodian Information Requests – SEC Study on RIA Custody Derivatives CFTC rules

11 Recent Guidance Asset Management Operations and Controls Handbook (January 2011) Provides a single, comprehensive source for OCC Asset Management operations issues, as well as procedures to assist examiners as well as the industry determine where the risks are.

12 OCC Bulletin # “Collective Investment Funds and Outsourced Arrangements” requires banks to: Perform due diligence on and periodically monitor your fund’s vendors Ensure only eligible participants are admitted to bank funds Include in any contract with a third party a requirement that the vendor will prominently identify the bank that sponsors the fund in any advertising and other materials. Rent-A-Trustee Concerns

13 OCC Bulletin # Principally applies to unaffiliated vendors such as RIAs Does not expressly apply to affiliates as we assume banks and their affiliated RIAs have a common interest not to unnecessarily assume reputation, compliance, strategic or transaction (operational) risks Continues to allow outsourcing of certain CIF functions to vendors, subject to longstanding OCC CIF and vendor management guidance. Rent-A-Trustee Concerns

14 Recent AM Group Guidance OCC Bulletin : “Self-Deposit of fiduciary funds” “Awaiting investment or distribution” – 12 CFR 9.10 Authorized unless prohibited by applicable law Rate must be consistent with applicable law Sufficient qualifying collateral must be pledged at all times Collateral must be controlled by two fiduciary employees “Permanent investments” - 12 CFR 9.12 Not permitted unless authorized by applicable law Pledge not permitted – heightens concern about credit risk

15 OCC Supervision Issues

16 Conflicts of Interest Issues OCC Bulletin (Divestiture of Certain Asset Management Businesses) Fee Arrangements Affiliated/proprietary investments Annual Review of Fiduciary Accounts OCC Bulletin (12 CFR 9.6(c)) Asset Management Exam Issues

17 Risk Considerations Investment Issues Investment Objectives Third Party Investment Managers Unique Investment Products or Strategies Investment Performance Fixed Income Strategies

18 Other Supervision Issues Impact of earnings pressure on internal controls Staffing Compliance/Risk Management functions Audit Coverage Regulation R Recordkeeping regulations Compensation and bonus plans Risk Considerations

19 Comments and Questions

20 OCC Asset Management Handbooks  Asset Management  ***Asset Mgt. Operations & Controls***  Collective Investment Funds  Conflicts of Interest  Custody Services  Insurance Activities  Investment Management Services  Personal Fiduciary Services  Retail Non-deposit Investment Products  Retirement Plan Services Handbooks and Bulletins are available at

21 Contact information: Joel Miller Asset Management Group Leader Phone: (202)