books and records and to deposit securities with the State authorities for the protection of private or court trusts whenever the State law requires competing State corporations exercising such powers to do so. It sometimes happens that a national bank which has obtained a permit from the Federal Reserve Board to exercise trust powers either has not exercised such powers or has discontinued the exercise of such powers and desires to relieve itself of the necessity of complying with the provisions of this subsection and to obtain the return of any securities which it may have deposited with the State authorities for the protection of private or court trusts. The law, however, provides no method by which a national bank may surrender its right to exercise such trust powers, and the State authorities sometimes refuse to return to them the securities deposited for the protection of private or court trusts. This results in inconvenience and sometimes an actual hardship on the national banks and is a situation which the Federal Reserve Board believes ought to be remedied by an amendment to the law. There is inclosed herewith a draft of a bill which would amend this subsection so as to provide a method whereby a national bank may surrender voluntarily the right to exercise its trust powers and which provides that, upon doing so, it shall be relieved of the necessity of complying with the provisions of this subsection, shall be entitled to the return of any securities which it may have deposited with the State authorities for the protection of private or court trusts, and shall not thereafter exercise any trust powers conferred by this subsection without first applying for and obtaining a new permit to exercise such powers. The procedure provided for in the inclosed bill contemplates the issuance of a certificate by the Federal Reserve Board to the effect that the bank is no longer authorized to exercise trust powers, and the bill would require the board, before issuing such certificate, to satisfy itself that the bank has been relieved in accordance with State law of any duties which it may have assumed by accepting appointments as trustee, executor, or other fiduciary. The issuance of such a certificate would also be made discretionary with the Federal Reserve Board, so that the board would require the bank to take any other steps which the board might consider necessary for the protection of the public before issuing such a certificate. The Federal Reserve Board will appreciate anything which you may do to further the enactment of the inclosed bill. Very truly yours, R. A. YOUNG, Governor. FEDERAL RESERVE BOARD, Hon. LOUIS T. MCFADDEN, Chairman Banking and Currency Committee, House of Representatives, Washington, D. C. SIR: I have received your letter of February 27 inclosing a copy of H. R. 10036, a bill to amend the Federal reserve act so as to enable national banks voluntarily to surrender the right to exercise trust powers and to relieve themselves of the necessity of complying with the laws governing banks exercising such powers, which was introduced by Hon. Benjamin M. Golder, of Pennsylvania, on February 18, 1930, in accordance with the recommendation made in my letter to you of February 14, 1930. It appears that Mr. Golder desires more detailed information as to the reasons for this legislation, together with references to material cases in point. As explained in my letter of February 14, subsection (k) of section 11 of the Federal reserve act (subsection (k) of section 248 of the United States Code, title 12) authorizes the Federal Reserve Board to grant by special permit to national banks applying therefor the right to act in certain fiduciary capacities when not in contravention of State or local law. This subsection also provides that: "National banks exercising any or all of the powers enumerated in this subsection shall segregate all assets held in any fiduciary capacity from the general assets of the bank and shall keep a separate set of books and records showing in proper detail all transactions engaged in under authority of this subsection. Such books and records shall be open to inspection by the State authorities to the same extent as the books and records of corporations organized under State law which exercise fiduciary powers, but nothing in this Act shall be construed as authorizing the State authorities to examine the books, records, and assets of the national bank which are not held in trust under authority of this subsection. * * * "Whenever the laws of a State require corporations acting in a fiduciary capacity, to deposit securities with the State authorities for the protection of private or court trusts, national banks so acting shall be required to make similar deposits and securities so deposited shall be held for the protection of private or court trusts, as provided by the State law." It sometimes happens that a national bank which has obtained a permit from the Federal Reserve Board to exercise trust powers either has not exercised such powers or has discontinued the exercise of such powers and desires to be relieved from the necessity of complying with the provisions of this subsection. Specifically, it desires to be relieved of the necessity of maintaining a separate set of books and records for its trust department and submitting such books and records to inspection by the State authorities; and, what is more important, it desires to obtain the release from the State authorities of such securities as it may have deposited with them for the protection of private or court trusts. In a few States, notably Pennsylvania, Wisconsin, and Florida, when this question has arisen, the State authorities have suggested that the national banks should relinquish their trust powers before the State authorities would be justified in releasing to them the securities deposited for the protection of private or court trusts. Where a bank is not actually exercising trust powers and is not executing any trusts, there would seem to be no practical reason for requiring it to maintain a deposit of securities with the State authorities, and it is doubtful that the Federal reserve act requires it; but the State authorities will not release such securities without some assurance from the Federal Reserve Board that the banks have relinquished their right to exercise trust powers. The law does not provide any method by which a national bank which has once obtained a permit to exercise trust powers, may lawfully surrender such permit and have it cancelled. Under these circumstances, it is doubtful whether a certificate issued by the Federal Reserve Board certifying that the permit to exercise trust powers previously granted to a national bank has been surrendered and cancelled would have any legal effect; and, in view of such doubt, the Federal Reserve Board has never felt justified in issuing such a certificate. The result has been that several national banks, which are not exercising any trust powers at all, have securities deposited with the State authorities which they desire to use in the conduct of their banking business and which they can not obtain from the State authorities under existing law. This clearly is an undesirable situation and may sometimes result in serious inconvenience, if not actual hardship, to the banks. Under these circumstances, it seems clear that the law should be amended so as to provide a definite method with proper safeguards by which a national bank could voluntarily surrender its permit to exercise trust powers and the Federal Reserve Board could issue a certificate to the effect that such trust powers have been surrendered and that the bank is no longer authorized to exercise trust powers. The sole purpose of the bill inclosed in my letter of February 14, 1930, which was introduced by Mr. Golder as H. R. 10036, is to cover this hiatus in the law and provide a means whereby national banks may be relieved of unnecessary burdens after satisfying the Federal Reserve Board that they have properly been relieved of all duties as trustee, executor, administrator, or other fiduciary. The exact means by which the board should satisfy itself as to the facts in any given case must necessarily be left to the board's judgment, in order that the board may take such steps as would be appropriate in view of all the circumstances in each particular case. However, it is contemplated that, upon receipt of an application for the surrender of trust powers, the board would arrange with the Comptroller of the Currency for a national-bank examiner either to make a special examination or, on the occasion of his next regular examination of such bank, to make a special investigation of the records of the trust department and determine whether such bank has ever received any appointments to act as trustee, executor, or other fiduciary, and, if so, whether it has properly been relieved of all duties under such appointments. If it has actually accepted and undertaken the execution of any trusts, the bank's records should show that its duties under each trust have been completely discharged or that substitute trustees have been appointed and, in the case of court appointments, that the courts have approved final accountings. In the case of private trusts, the bank should have in its records releases showing that it has delivered to the proper persons all funds and securities that it has received in trust and has been relieved of all further duties as trustee. These are facts that can be definitely ascertained; and the Federal Reserve Board would not issue to any national bank a certificate such as that provided for in this bill until it is satisfied that the bank has been properly relieved of all duties and liabilities assumed through the exercise of trust powers. For your further information, there are inclosed copies of correspondence between the commissioner of banking of the State of Wisconsin, a national bank in that State, and the Federal Reserve Board, with reference to the desire of the national bank to surrender its trust powers and to obtain from the State bank commissioner the surrender of the securities deposited with him for the protection of private and court trusts. You will note that this matter has been under discussion since August, 1927, and that the bank has not yet been able to obtain the surrender of its securities. There are two similar cases involving national banks in Pennsylvania and one each in California and Florida, some of which also date back to 1927. In these other cases the correspondence is not so complete or enlightening and the attitude of the State authorities is not so clearly defined in the correspondence; but the practical situation is substantially the National Bank of GENTLEMEN: The Wis., applied for and received from your board authority to exercise fiduciary powers under section 11, subsection (k) of the Federal reserve act. In due course, they petitioned this department for a permit to exercise the powers in Wisconsin provided for under section 221.04, subsection (6) of the Wisconsin statutes, which was granted. Now comes the aforesaid with an offer to surrender such privilege and to have returned to them such securities as they may have deposited with the State treasurer in compliance with the statute of Wisconsin. National Bank of Both the Federal reserve act and the Wisconsin statute provide the method by which banks may take to themselves fiduciary powers, but in neither case is there any procedure or law for the surrender of such rights. The State treasurer has no authority to release the securities deposited with him and I wish to learn whether this matter has ever come up before and in what way the Federal Reserve Board terminates fiduciary powers. The only practical way that has occurred to us has been for the officers of that bank to make affidavit that they are not exercising any of the powers conferred upon them and have no trusts of any nature and that they have surrendered their rights. And for the board of directors to pass a resolution addressed to the Federal Reserve Board and to the commissioner of banking stating their desire to surrender their rights and to transmit a copy of such resolution, also, to the State treasurer. If there is any other way of handling this situation, we will be very pleased to have your suggestions. Yours very truly, Mr. WALTER L. EDDY, C. F. SCHWENKER, Commissioner. STATE OF WISCONSIN, Madison, October 20, 1927. Secretary Federal Reserve Board, Washington, D. C. DEAR MR. EDDY: Up to this time we have not heard of the filing and recommendations of the Federal Reserve Board as toward the surrender of fiduciary powers. A national bank in this State wishes to surrender its powers and no provision seems to have been made for such surrender. Will you kindly remind your counsel of this matter. Very truly yours, C. F. SCHWENKER, Commissioner. OCTOBER 24, 1927. Mr. C. F. SCHWENKER, Madison, Wis. DEAR SIR: Receipt is acknowledged of your letter of August 11, with reference to the termination of the fiduciary activities of the National Bank of Wis., and the recovery of securities which were deposited by that bank with the authorities of Wisconsin. It appears that the National Bank is about to terminate its fiduciary activities and you suggest that in order for it to secure the return of securities which have been deposited with the State authorities in accordance with the provisions of section 11 (k) of the Federal reserve act and the laws of Wisconsin it should surrender its right to exercise trust powers. It is provided in section 11(k) of the Federal reserve act that "Whenever the laws of a State require corporations acting in a fiduciary capacity to deposit securities with the State authorities for the protection of private or court trusts, national banks so acting shall be required to make similar deposits and securities so deposited shall be held for the protection of private or court trusts, as provided by the State laws." As indicated in your letter there is no provision in the Federal reserve act with reference to the recovery of securities which have been deposited by a national bank exercising trust powers with State authorities. You will note, however, that the above quoted provision of section 11 (k) does not require a national bank to deposit securities with the State authorities when it merely receives authority from the board to exercise trust powers but a national bank is only required to do so if it acts in fiduciary capacities, provided, of course, that State institutions exercising trust powers are required to make similar deposits. In view of this fact the board is of the opinion that a national bank which has terminated all of its fiduciary activities is not legally required to surrender its right to exercise trust powers in order to recover securities deposited with State authorities, but in the board's opinion it would be sufficient if the bank presented to the State authorities satisfactory evidence that it had terminated all of its fiduciary activities. The question as to what evidence should be submitted to the State authorities on this point is one primarily for the decision of such authorities but it would seem to be sufficient if the officers of the national bank make affidavit that the bank is not exercising any fiduciary powers and has no trusts of any nature and that the bank will not undertake to exercise any fiduciary powers without depositing securities with the State authorities as required by section 11 (k) of the Federal reserve act. If you desire any further information in this matter please advise the board. By direction of the Federal Reserve Board. FEDERAL RESERVE BOARD, Washington, D. C. National Bank of WALTER L. EDDY, Secretary. DEAR SIRS: We, the undersigned, as vice president and cashier, respectively, of the Wis., pursuant to the resolution adopted by the board of directors of said bank at a regular meeting thereof held on the 10th day of December, 1929, inclose herewith for your consideration: (1) Certified copy of resolution adopted by the board of directors of the National Bank of Wis., at a regular meeting of said board of directors duly held on the 10th day of December, 1929. Wis. (2) Formal certificate granting permission by the Federal Reserve Board under the provisions of section 11(k) of the Federal reserve act to National Bank of The Wis., hereby surrenders to the Federal Reserve Board for cancellation or revocation the permit heretofore issued to it on or about the 24th day of November, 1925, granting permission to said bank to act as trustee, etc., or in any other fiduciary capacity. For your information you are advised that the acted as trustee, etc., or in any other fiduciary capacity as authorized by said permit, and, as the resolution shows, the bank has decided not to do business as trustee, etc., or in any other fiduciary capacity in the future. We are anxious to take all steps necessary to have our authority to act as trustee canceled or surrendered, to the end that the securities deposited by the bank with the State treasurer of the State of Wisconsin be returned to said bank. HR-71-2-VOL 4-15 National Bank has never After preliminary steps have been taken as provided by said resolution a friendly law suit will no doubt have to be instituted to recover our deposited assets. Will you kindly take such action with regard to this matter as will expedite the cancellation or surrender of our authority and the return of the deposited securities. There seems to be no "guiding star" precedent in matters of this sort, but we hope that we are proceeding in the right way to accomplish the desired results. Respectfully yours, Vice President. STATE OF WISCONSIN, The undersigned, 88: and National Bank of vice president and cashier, respectively, of the Wis., do hereby certify that a certain resolution, a true and correct copy of which is hereto attached, was on motion made, duly passed, and adopted by the board of directors of the National Bank of Wis., at a regular meeting of said board of directors duly held on the 10th day of December, 1929. And we do further certify that said resolution when adopted was duly spread upon the minutes of said meeting. Dated December 16, 1929. Vice President. On this 16th day of December, 1929, personally appeared before me, a notary public in and for the county of and State of Wisconsin, and to me known to be the vice president and cashier, respectively, of the National Bank of Wis., who subscribed the above and foregoing certificate in my presence and made oath, each for himself, that he has read the above and foregoing certificate subscribed by them and each of them, and that the same is true of his and their own knowledge. My commission expires Notary Public, County, Wis. RESOLUTION OFFERED BY DIRECTOR Whereas the National Bank of -, Wis., a banking corporation duly organized and existing under and by virtue of the laws of the United States of America, did heretofore, to-wit, on or about the 10th day of November, 1925, under authority of a resolution of the board of directors of said bank, duly adopted and spread on the minutes of a meeting held on the 10th day of November, 1925, duly make application to the Federal Reserve Board of Washington, D. C., for a permit to act as trustee, executor, administrator, registrar of stocks and bonds, guardian of estates, assignee, receiver, committee of estates of lunatics, or any other fiduciary capacity, under authority of Section 11(k) of the Federal reserve act as amended by the act of September 26, 1918; and Whereas said Federal Reserve Board did thereafter on or about the 24th day of November, 1925, pursuant to authority vested in said board by the Federal reserve act as amended, duly issue and deliver to said bank a permit to act, when not in contravention of State or local law, as trustee, executor, administrator, registrar of stocks and bonds, guardian of estates, assignee, receiver, committee of estates of lunatics, or in any other fiduciary capacity in which state banks, trust companies, or other corporations which come into competition with national banks, are permitted to act under the laws of the State of Wisconsin, subject to regulations prescribed by the Federal Reserve Board; and Whereas said National Bank did thereafter duly apply to the State Banking Department of the State of Wisconsin for authority to act as trustee, etc., as authorized by the Federal Reserve Board, and did deposit with the State Treasurer of the State of Wisconsin, as required by the laws of the State of Wisconsin, securities of the value of $50,000, which said securities so deposited as aforesaid were duly approved by the commissioner of banking of the State of Wisconsin, all as required Ly the laws of said State; and |