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4000 - Advisory Opinions

Trust Companies That Do Not Provide Non-Fiduciary Deposit Taking Services or Extend Credit Are Not Subject to Depository Institution Interlocks Act


July 26, 1993

Pamela E. F. LeCren, Senior Counsel

This letter is in response to your correspondence of March 5, 1993, and June 28, 1993. You inquired whether the expanded business activities of [trust company ("TC")] brought it under the definition of a "depository institution" within the meaning of the Depository Institution Interlocks Act (12 U.S.C. § 3201 et. seq., 12 C.F.R. 348, "Interlocks Act"). For the reasons stated below, we conclude that [TC] should not at this time be considered a "depository institution" for purposes of the Interlocks Act, but again reserve the prerogative to reassess this opinion should [TC] engage in a commercial banking business or substantially increase its lending activities.


The Interlocks Act prohibits management officials from serving two or more unaffiliated "depository institutions" depending upon the size and location of the institutions in question. The term "depository institution" is defined by the Interlocks Act to mean "a commercial bank, a savings bank, a trust company, a savings and loan association, a building and loan association, a homestead association, a cooperative bank, an industrial bank, or a credit union." (12 U.S.C. 3203(1)) (emphasis added). It has been the FDIC Legal Division's opinion for some time that this definition is enumerative and not illustrative, i.e., in order for an entity to be considered a "depository institution" for the purposes of the Interlocks Act the entity must fall within one of the classifications of institutions listed in the definition. We do not apply a functional test and have, for the most part, simply deferred to state law on the issue of whether a particular entity is a commercial bank, a savings bank, a savings and loan association, a trust company, etc.

Although the Interlocks Act expressly includes "trust companies" within the definition of a depository institution, we have determined that Congress did not intend to include those trust companies which do not provide non-fiduciary deposit taking services or extend credit. Congress wanted to ensure that financial services, specifically deposit and credit services, continued to be provided to the public in a competitive manner. They recognized that "[a]nticompetitive interlocks can have an impact on the flow of credit and financial policies and practices to the detriment of communities, neighborhoods and small businessmen, home buyers, farmers, consumers, and others in need of credit on the best terms possible." 1978 U.S. Cong. & Admin. News 9273, 9286. Thus, Congress alluded to depository institutions as those organizations which either did or could accept deposits and extend credit to a community.

A trust company may properly be included within the category of depository institutions since such institutions may be authorized by the laws of certain states to make extensions of credit and accept deposits from individuals. Under Pennsylvania law, however, a trust company is not authorized to take deposits. (See Pa. Stat. Ann. tit. 7, §§ 105, 401 (Purdon)). You have represented that [TC]'s expanded marketing endeavors do not include taking non-fiduciary deposits or extending commercial loans. You state that, although [TC] did originate mortgage loans prior to 1981, it does not now make direct loans or otherwise extend credit, nor do the expanded marketing efforts include increasing loan volume. Moreover, you indicate that [TC] engages almost exclusively in managing taxable trusts, IRA, pension, and profit sharing trusts, including two collective trust funds of qualified pension trusts. At the end of 1992, approximately 92% of [TC]'s assets were composed of the *** Trust. In light of all this, [TC]'s activities do not make it a provider of financial services that will place it in competition with other "depository institutions" within the meaning of the Interlocks Act.


We do not believe at this time that [TC] should be considered a "depository institution" for the purposes of the Interlocks Act. Although [TC] has expanded its trust business, it essentially remains involved in the administration of one large trust. This opinion will be re-evaluated if [TC] should in the future engage in any commercial banking business or substantially increase its lending activities.

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