Magazine article American Banker

OTS Decides to Put a Hold on 4 Charter Applications, Citing Concern over Trusts

Magazine article American Banker

OTS Decides to Put a Hold on 4 Charter Applications, Citing Concern over Trusts

Article excerpt

WASHINGTON

Unprepared to supervise the trust activities of major financial services firms, the Office of Thrift Supervision has stopped processing charter applications from at least four large nonbanks.

The unidentified securities firms and insurance companies want thrift charters to offer customers trust services nationwide.

Ironically, trust charters were once considered the least controversial of all unitary thrift holding company applications. But today the companies seeking the charters are larger, and the operations they are proposing are more complicated.

For example, these companies want to manage many of the functions typically handled by thrifts themselves, ranging from administrative functions to investment planning, explained Scott M. Albinson, managing director of the OTS' office of supervision.

Specifically, the OTS is concerned about whether assets that are held in trust are being invested in funds operated by the parent company or its affiliates. If so, the agency wants to ensure that the investments are being made in the best interests of the beneficiary-not to serve the interests of the parent company.

"We are moving carefully and cautiously," Mr. Albinson said. "We're looking at methods to ensure that strong internal controls exist."

Though these applications are officially still pending, they are essentially in limbo because the OTS has given itself an unlimited amount of time to make a ruling. More applications could be suspended.

Mr. …

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