On Sep. 10, COL BANK amended various rules on trust companies.
COL BANK proposed to amend, promulgate Banking Board Rules for trust companies.
Under COL FIN 3-706-1, proposed to promulgate TC1, and TC28, to establish definitions, requirements pertaining to the surrendering of a trust company charter.
Additionally, proposed requirements pertaining to an audit of fiduciary activities.
Amended several rules to clarify, update definitions, procedures, and requirements.
Incorporated by reference applicable federal code; grammatical, technical changes.
Capital Requirements
Established minimum capital requirements for non-depository trust companies (NDTC).
Increased initial capital required to charter a NDTC from $1,000,000 to $1,500,000.
Minimum total capital requirement was increased from $750,000 to $1,000,000.
Increases required to align with current trust business costs, align minimum level from 1997 to equivalent levels in 2024, and the increase in complexity of NDTC operations.
36 month phase-in period for existing trusts to comply with proposed minimum total.
Commissioner discretion to restrict NDTC's capital distributions, engagement in certain activities, payment of excessive compensation, bonus, could further deplete capital.
Revised definitions, minimum capital ratios to include capital adequacy standards and calculation of said capital ratios via incorporation by reference 12 CFR III; Redline.
Out-of-State Offices
Aim to establish specific guidelines and minimum standards for out-of-State trust companies for establishment of trust offices, representative trust offices in Colorado.
Amended COL FIN 3-701-6 TC22, Establishment of a Colorado office location by a trust company chartered in another State; provided a redline version of changes.
Updated statutory citation; Update types of depository institutions; removed industrial banks regulation, which was repealed effective Jul. 1, 2013; updated rule citations.
Removed obligation for out-of-State trust annually pay fee to COL BANK for operating representative trust office/trust office in COL to align with current Division practices.
Replaced by capital CFRs for FDIC-regulated institutions via incorporation by reference.
Minimum capital-to-total assets ratio requirement into Rule 3 CCR 701-6 TC13.5, thereby making 3 CCR 701-6 TC14 no longer necessary; Provided redline of changes.
Minimum Bond, Error, Omissions Insurance
Set minimum amounts bond, error, omissions insurance trust company must maintain.
Removed term surety bond, replaced with fidelity bond, more appropriate for a trust.
Adjust minimum bond amount from initial 1993 amount $1mn to 2024 equal, $2mn.
Required trust conduct risk analysis for amount of fidelity bond, errors, omissions ins.
Corporate insurance/ bonding company must be authorized to do business in Colorado.
1-year phase-in to allow trust time to comply to new minimum fidelity bond; Redline.
Liquidation Holdings
Required trust companies to hold $250,000 in eligible securities for COL BANK to use, in the event of liquidation of the company, to cover Division expenses; issued Redline.
Amend COL FIN 3-701-6 TC17, deposit of securities; clarified only applies to NDTCs.
As depository trust companies are insured by FDIC, who serves as receiver, liquidator.
Updated the definition of eligible securities by removing the reference to liquid capital.
Replaced the reference with updated verbiage; made minor, grammatical corrections.
Loan Purchases
Established specific guidelines for depository trust companies (DTCs) to purchase existing commercial loans or participations in existing commercial loans; Redline.
Amended COL FIN 3-701-6 TC18, investments in loans; Aligned rules with the OCC lending limit regulations (12 CFR 32) and FDIC capital regulations (12 CFR 324).
Reference COL FIN 11-109-907(2), on 2 instances DTC may make loan/extend credit.
Updated types of depository institutions; Regulation of industrial banks repealed 2013.
Thus, non-depository trust companies may not accept deposits, should be removed.
Included Prompt Corrective Action adequately capitalized capital ratios through the incorporation by reference the following applicable code of federal regulations.
Allow lender additional time to bring nonconforming loan in compliance where judicial proceedings, regulatory actions/other extraordinary occurrences prevent such action.
Subsidiary Investment
Set limitations for a trust company investing in an operating subsidiary; Redline.
Amend TC19, Investment in a subsidiary to modernize limits of trusts investment in operating subsidiary to increase parity with OCC regulation of national banks.
Expanded the operating subsidiaries in which a trust company can invest.
Decreased percentage of voting interest of operating subsidiary from 80% to 50%.
Set conditions operating subsidiary may engage in activities parent trust may engage.
Defined meaning of the ability to control the management, operations of subsidiary.
Expanded business entities in which trust, via operating subsidiary, may invest.
Decrease ownership level in business trust, via subsidiary, may invest, from 80 to 50%
Required business entity in which trust invests agree to COL BANK supervision, exam.
Call Report Filing
Specified Call report filing requirements for depository, non-depository trust entities.
Amend TC20, Reports of condition, income (Call Report) filing requirements; Redline.
Reinstated section on filing of Call Reports within 30 calendar days after the report date that was removed entirely upon expiration of Mar. 31, 2020 Emergency rule.
Updated filing requirement for NDTC's from paper filing to electronic filing.
Additionally, clarified that call reports are completed on a consolidated basis.
Fiduciary Accounts
Defined proper assets per fiduciary accounts for which trust has investment discretion.
Redline; 2023 Banking sunset review recommend new COL FIN 11-109-908, Fiduciary accounts - duties of trust companies - rules, required COL BANK promulgate new rule.
New rule to define what assets are appropriate as term pertains to fiduciary accounts for which trust has investment discretion; Rule TC1 will establish that definition.
Account Restrictions
Reiterated restriction of certain deposit, transaction deposit accounts per statutes.
Therefore, repealed Rule TC6, concerning Collateralization of deposits; Redline.
GAAP Exceptions
Allow trusts deviate on exception basis from generally accepted accounting principles (GAAP) in filing some supervisory, regulatory documents with State, federal agencies.
Amends TC7, GAAP, to include standards issued by FASP as part of definition of GAAP.
Redline; Clarified the Accounting principles board (APB) was the precursor to the FASB.
Update Financial Accounting Foundation organization structure; APB not in existence.
Removed reference verbiage as GAAP changes routinely, trust companies should prepare financial statements, reports in conformance with current GAAP requirements.
Dividend Restrictions
Applied restrictions to declaration, payment of dividends by State-chartered trust co.
Amend TC8, Dividends, which is silent on capital limitations on payment of dividends.
Including limit needed to help ensure State-chartered trusts maintain sufficient capital.
Current Earnings limitation on payment of dividends does not provide clarification on source of dividend payments, nor definition of undivided profits, needed for clarity.
Incorporate by reference Prompt corrective action undercapitalized definition; Redline.
Self-Dealing
Established transactions between related parties, interests of trust, its fiduciary accounts represent self-dealing, prohibited except very limited circumstances in TC21.
Broadened scope of law applicable to a trust company’s investment of funds of fiduciary accounts when it has investment discretion authority over fiduciary accounts.
Clarified who should be included as prohibited parties; Broadened the scope of law applicable to a trust company’s selling of assets between fiduciary accounts.
Removed statement trust company may borrow money on behalf of fiduciary account from itself since trust companies are not allowed to originate loans; Redline.
Investment Limits
TC9 provides information, requirements on limits of a Trust Company’s investments.
Made changes to better align investment limitations with federal investment limits.
Clarified that Type II and III securities are limited to 10 percent of capital and surplus.
That Type IV have no investment limit; Type V limited to 25% of capital and surplus.
When applying limits for Type II, III, and V securities, trust company is to take account of security type it is legally committed to purchase in addition to its existing holdings.
Added requirements pertaining to the calculation of Type III and V securities holdings.
Requirement on certain credit information to be maintained in investment files.
Also, treatment of nonconforming investments; incorporations by reference; Redline.
Charter Cancellation
Promulgated TC28 to establish requirements for canceling a trust charter; Redline.
Establish the timeframe in which an inactive trust company must surrender its charter.
Guidelines for trust, who at cancelation was in good standing, to reapply for charter.
Executive, Officer Changes
Amend TC10, on notification to COL BANK of new or changes in executive officers, directors, persons in control; Outlined penalties for late filing of said notices; Redline.
Increased late filing penalty from $25 per day to $100, per HB 24-1351, see #215317.
Directors' Exams
TC 11 provided scope of Directors’ exams, extent of testing, reports, their due date.
Minor grammatical, technical changes; incorporated sections by reference; Redline.
Capital Requirements
Amended TC13, due to proposed repeal of TC14, to reflect that both leverage and risk-based capital ratios are addressed in rule, and capital adequacy standards; Redline.
Proposed increase in alignment with the proposed increase in 3 CCR 701-6 TC13.5.
Revised definitions and minimum capital ratios to include the capital adequacy standards and calculation of said capital ratios through the incorporation by reference.
Consultation
Rulemaking Hearing Oct. 17, 2024; Comments due by Oct. 7, 2024.
