The Trust Requirements In order to put national banks more nearly on the same com petitive plane as state banks and trust companies, the Federal Reserve Act authorized the Federal Reserve Board to grant by special permit to national banks applying therefor, when not in contravention of state or local law, the right to act as trustee, executor, administrator, or registrar of stocks and bonds, under such rules and regulations as the board may prescribe. Such application is made by the national bank through the chairman of the board of directors of the federal reserve bank of that dis trict, who transmits it to the Federal Reserve Board with his rec ommendations. The board reserves the right to revoke any such permits where in its opinion the bank has wilfully violated its regu lations or the laws of the state relating to such trust operations.
A national bank permitted to perform the trust functions is required to establish a separate trust department under the man agement of an officer or officers, whose duties must be prescribed by the board of directors of the bank. The funds, securities, and investments held in each trust must be held separate and dis tinct from the general funds and securities of the bank and sepa rate and distinct from one another. They must be placed in the joint custody of two or more officers or other employees desig nated by the board of directors, and all such officers or employ ees must be put under bond. The ledgers and other books kept for the trust department must be entirely separate and apart from the other books and records of the bank.
This department is subject to examination by the examiners appointed by the Comptroller of the Currency or designated by the Federal Reserve Board, at the same time as the examination is made of the other departments of the bank. It is also subject to inspection by the state authorities to the degree that the state banks and trust companies are subject to an inspection of their trust business.
No national bank has, with respect to trust business, any rights or privileges in contravention of the laws of the state in which the bank is located. On the other hand, it enjoys without discrimination any rights or privileges conferred by the state upon the state banks and trust companies competing with it.
No national bank may receive in its trust department de posits of current funds subject to check or the deposit of checks, drafts, bills of exchange, or other items for collection or exchange purposes. Funds deposited or held in trust by the bank await ing investment must be carried in a separate account and not be used by the bank in the conduct of its business, unless it first sets aside in the trust department United States bonds or other securities approved by the Federal Reserve Board.
Funds held in trust must be invested in strict accordance with the terms of the will, deed, or other instrument creating the trust. Where the instrument creating the trust contains provi
sions authorizing the bank, its officers, or its directors to exercise their discretion in the matter of investments, funds held in trust may be invested only in those classes of securities which are approved by the directors of the bank. Where the instrument creating the trust does not specify the character or class of in vestments to be made and does not expressly vest in the bank, its officers, or its directors a discretion in the matter of invest ments, funds held in trust must be invested in any securities in which corporate or individual fiduciaries in the state in which the bank is located may lawfully invest.
Except as provided otherwise, a national bank acting as executor, administrator, or in any other fiduciary capacity, under appointment by a court of competent jurisdiction, must make all investments under an order of that court, and copies of all such orders must be filed and preserved with the records of the trust department. If the court by general order vests a discretion in the national bank to invest funds held in trust, or if under the laws of the state in which the bank is located corporate fiduciaries appointed by the court are permitted to exercise such discretion, the national bank so appointed may invest such funds in any securities in which corporate or individual fiduciaries in the state in which the bank is located may lawfully invest.
Development of a Trust Department The trust department is not a bank within a bank. It should, however, be located by itself, much as the savings department is, accessible to the public, and the officers and clerical force should not be far removed from each other.
The most important action in the establishment of a trust department is the selection of the trust officer. He should be a man of the very highest moral integrity, and especially fitted by temperament, expert knowledge, and long training in fiduciary business. His duties are multifarious. He should be a lawyer, and a very "versatile one, for there come before him every form of business complication and every phase of human character, good and bad. There is no problem, legal or otherwise, which our complex civilization brings forth, which he may not be called upon to solve." In most respects trust business differs from commercial banking—in principles, technical procedure, legal and personal relationships with customers, and so forth; hence not every successful commercial banker makes a successful trust officer. It is unwise and dangerous to have but one trust officer; there should be two or more entirely familiar with the work and jointly responsible.