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4000 - Advisory Opinions


Deposit Insurance for Colorado Trust Companies

FDIC-85-14

June 17, 1985

Roger A. Hood, Assistant General Counsel

This is in response to your letter of April 24 inquiring about the eligibility of Colorado trust companies for deposit insurance.

To be eligible for deposit insurance, a bank, trust company or similar entity, as set out in section 3(a) of the Federal Deposit Insurance Act (12 U.S.C. § 1813(a)), must first be "engaged in the business of receiving deposits, other than trust funds as . . . defined [in section 3(p) of the Act]." Section 3(p) states: "The term trust funds' means funds held . . . in a fiduciary capacity and includes, without being limited to, funds held as trustee, executor, administrator, guardian, or agent."

Section 11-23-103 of the Colorado Revised Statutes, captioned "Powers of trust companies", provides in subsection (2) that "[e]xcept for those powers specifically authorized in subsection (1) . . . , a trust company shall not have the power to conduct a banking business. . . ." Subsection 1(d), on the terms of which you ask us to focus, authorizes a trust company to: "Maintain savings deposits, time deposits, and certificates of deposit for the investment of fiduciary funds and other accounts for which a trust company is empowered to act under this article. . . ."

Insofar as subsection 1(d) empowers a trust company to accept deposits of "fiduciary funds", it plainly falls short of conferring the power required by section 3(a) of the FDI Act to be both possessed and exercised. Insofar as subsection 1(d) of C.R.S. § 11-23-103 empowers a trust company to accept deposits of "other accounts for which a trust company is empowered to act", it similarly falls short, as we read the statute. That is to say, such "other accounts" would all be deemed accounts comprised of "trust funds" under the terms of section 3(p) of the FDI Act.

Thus, for example, subsection 1(b) of C.R.S. § 11-23-103 empowers a trust company to "[a]ct as a transfer agent, a registrar, an escrow agent, or an attorney-in-fact and to receive, manage and apply sinking funds." While subsection 1(b) (unlike subsection 1(a)) does not characterize a trust company as acting in a "fiduciary capacity" when it performs the described roles, a trust company so engaged and receiving funds would be acting in a "fiduciary capacity" within the meaning of the FDI Act. We find nothing in any other provision of C.R.S. § 11-23-103 that empowers a trust company to engage in the business of receiving deposits, other than "trust funds", as defined in section 3(p) of the FDI Act.

Accordingly, it appears to us that Colorado trust companies, as presently empowered, are not eligible for deposit insurance. To meet the threshold requirement, trust companies need first to be empowered to receive deposits, on a simple debtor-creditor basis, from individuals, corporations, partnerships, or other eligible entities, acting in their respective rights and capacities as such. This power must also be exercised, as already indicated. And, if, following qualification for deposit insurance, this power should cease to be exercised, section 8(p)) of the FDI Act (12 U.S.C. § 1818(p)) requires the FDIC to terminate the insured status of the institution.

In view of the concern you express about uninsured monies held by Colorado trust companies, we point out that funds deposited in an insured bank by a trustee, agent, or other similar authorized representative, are eligible for deposit insurance under the terms and conditions set forth in the FDI Act and in our deposit insurance regulation. (See 12 C.F.R. §§ 330.1; 330.2(b), (c); 330.4; 330.10).


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