STATEMENT OF PRINCIPLES OF
TRUST DEPARTMENT MANAGEMENT
The minimum requirements
to provide for sound banking practices in the operation of a trust department
and to provide safeguards for the protection of depositors, fiduciary beneficiaries,
creditors, stockholders, and the public, should include:
the board of
Directors in providing
for the establishment and continuing operation of a trust department;
Operation of the
trust department separate and apart from every other department of the
bank, with trust assets separated from other assets owned by the bank,
and the assets of each trust account separated from the assets of every
other trust account; and
separate books and records for the trust department in sufficient detail
to properly reflect all trust department activities.
Nothing herein is intended
to prohibit the board of Directors from acting as the trust committee, or
from appointing additional committees and officers to administer the operations
of the trust department. When delegating duties to subcommittees and/or
officers, the board and the trust committee continue to be responsible for
the oversight of all trust activities. Sufficient reporting and monitoring
procedures should be established to fulfill this responsibility. The board
of Directors, by proper resolution included in its minutes, should:
1. Designate an officer,
qualified and competent, to be responsible for and administer the activities
of the trust department. In addition, the board should define the officer’s
2. Name a trust committee
consisting of at least three Directors to be responsible for and supervise
the activities of the trust department. The committee should include, where
possible, one or more Directors who are not active officers of the bank.
The trust committee
(a) Meet at least quarterly,
and more frequently if considered necessary and prudent to fulfill its supervisory
(b) Approve and document
the opening of all new trust department accounts; all purchases and sales
of, and changes in, trust assets; and the closing of trust accounts;
(c) Provide for a comprehensive
review of all new accounts for which the bank has investment responsibility
promptly following acceptance;
(d) Provide for a review
of each trust department account, including collective investment funds,
at least once during each calendar year. The scope, frequency, and level
of review (trust committee, subcommittee, or disinterested account officer)
should be addressed in appropriate written policies which give consideration
to the department’s fiduciary responsibilities, type and size of account,
and other relevant factors.
account reviews should cover both administration of the account and suitability
of the account’s investments, and non-discretionary account reviews should
address account administration;
(e) Keep comprehensive
minutes of meetings held and actions taken; and
(f) Make periodic reports
to the board of its actions.
3. Provide comprehensive
written policies which address all important areas of trust department activities.
4. Provide competent
legal counsel to advise trust officers and the trust committee on legal
matters pertaining to fiduciary activities.
5. Provide for adequate
internal controls including appropriate controls over trust assets.
6. Provide for an adequate
audit (by internal or external auditors or a combination thereof) of all
fiduciary activities, annually. The findings of the audit, including actions
taken as a result of the audit, should be recorded in its minutes.
If a bank adopts a continuous
audit process instead of performing annual audits, audits may be performed,
on an activity-by-activity basis, at intervals commensurate with the level
of risk associated with that activity. Audit intervals must be supported
and reassessed regularly to ensure appropriateness given the current risk
and volume of the activity.
7. Receive reports from
the trust committee and record actions taken in its minutes.
8. Review the examination
reports of the trust department by supervisory agencies and record actions
taken in its minutes.