Regulator Panel
FIRMA 25th Annual Risk
Management Training Conference
April 19, 2011
1
Regulatory Consolidation
2
OTS Fiduciary Activities &
Regulations
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OCC/OTS Consolidation – July 21, 2011
Fiduciary Powers – Thrifts vs. National Banks
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OCC - about 30% of national banks have fiduciary
powers.
OTS - about 10% of thrifts act as fiduciaries.
OTS Fiduciary Regulations:
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In general, OTS regulations track OCC’s 12 CFR 9
One notable exception - certain fiduciary activities
performed by a thrift do not require fiduciary
powers. Examples: Acting as trustee of certain
EB plans, or acting as an IRA trustee.
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Where are all those
Assets Invested?
4
Asset Management
Statistics
Fiduciary and Related Assets - All Banks 12/31/2010
FIDUCIARY AND RELATED ASSETS ($000s)
Personal trust and agency accounts
Employee benefit and retirement related trust and agency
Employee benefit - Defined contribution
Employee benefit - Defined benefit
Other employee benefit & retirement related
Corporate trust and agency accounts
Investment management & investment advisory
Foundation and endowment
Other fiduciary accounts
Total Fiduciary Accounts
Custody and safekeeping accounts
Total Fiduciary & Custody/Safekeeping Accounts
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Managed
Non-Managed
Total Assets % of Fid Assets
$ 667,493,826 $ 268,188,714 $ 935,682,540
5%
$ 650,877,773 $ 1,974,384,839 $ 2,625,262,612
$ 972,523,527 $ 4,561,055,911 $ 5,533,579,438
$ 221,011,369 $ 1,527,799,616 $ 1,748,810,985
$
20,219,820 $ 3,885,101,206 $ 3,905,321,026
$ 1,157,544,060 $
26,016,163 $ 1,183,560,223
$ 188,330,728 $ 184,595,013 $ 372,925,741
$ 189,001,140 $ 3,779,464,147 $ 3,968,465,287
$ 4,067,002,243 $ 16,206,605,609 $ 20,273,607,852
$ 67,610,853,883 $ 67,610,853,883
$ 87,884,461,735
13%
27%
9%
19%
6%
2%
20%
100%
EB and retirement related accounts make up 50% of
the fiduciary assets administered by banks.
Source: Preliminary 12/31/2010 Call Report data. Includes all national and state-chartered commercial banks and national trust banks.
5
Asset Management
Statistics
Total Market Value of Collective Investment & Common Trust
Funds Continues to Increase from 2008 lows.
$3.50
$2.94
$3.00
$3.00
$2.68
$2.51
$2.50
$2.32
$2.29
$ trillion
$2.01
$2.02
$2.37
$2.00
$2.00
$1.75
$1.74
$1.67
$1.64
$1.51
$1.50
$1.33
$1.00 $0.85
National Banks
All Banks
$1.47
$1.26
$0.90
$0.50
$0.00
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Source: Preliminary 12/31/2010 Call Report data. Includes all national and state-chartered commercial banks and national trust banks.
6
Asset Management
Statistics
Managed Assets held in Fiduciary Accounts - All Banks 12/31/2010
U.S. Treasury/Government Agency
Obligations, 3%
Money Market Mutual Funds, 3%
Unregistered Funds and Private Equity
Funds, 4%
Municipal Obligations, 5%
Common Trust Funds and Collective
Investment Funds, 29%
Other Short-term Obligations, 5%
Equity Mutual Funds, 6%
Other Mutual Funds, 5%
Common and Preferred Stock, 22%
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Other Notes and Bonds, 9%
Misc Assets, 7%
Nearly one third ($1.2 trillion) of total managed assets held in fiduciary
accounts ($4.1 trillion) are invested in bank CIFs and CTFs.
Another $585 billion or 14% of managed assets are invested in mutual
funds; $224 billion of that $585 billion is invested in proprietary mutual
funds.
• Chart does not include investments in real estate, real estate mortgages and deposits since these represented 1% or less of total managed assets
• Source: Preliminary 12/31/2010 Call Report data. Includes all national and state-chartered commercial banks and national trust banks.
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Asset Management
Statistics
Collective Investment Fund Assets All Banks 12/31/2010
Specialty/Other, 5%
STIF/MM, 14%
Municipal Bond, 1%
Domestic Equity,
35%
Taxable Bond, 18%
Stock/Bond Blend,
6%

International Equity,
22%
57% or $1.3 trillion of total collective investment fund assets ($2.37
trillion) in 2010 were invested in domestic and international equities.
This is up from the 55% of collective investment fund assets that
were invested in domestic and international equities in 2009.
Source: Preliminary 12/31/2010 Call Report data. Includes all national and state-chartered commercial banks and national trust banks.
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Regulatory Focus
9
Dodd-Frank and Related
Issues
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Volcker Rule – organizing and offering hedge funds and
private equity funds will face limits.
Other D-F provisions that are likely to impact AM world:
 Money Market Funds/Shadow Banking
 Use of rating agencies in regulations
 Temporary FDIC insurance – transaction accounts
 New FDIC assessment rules/custody banks
 SEC “fiduciary standard”
 RIA Custodian Information Requests – SEC
 Study on RIA Custody
 Derivatives
 CFTC rules
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Recent Guidance

Asset Management Operations and Controls
Handbook (January 2011)

Provides a single, comprehensive source for OCC
Asset Management operations issues, as well as
procedures to assist examiners as well as the
industry determine where the risks are.
11
Rent-A-Trustee
Concerns

OCC Bulletin #2011-11 “Collective Investment
Funds and Outsourced Arrangements”
requires banks to:
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Perform due diligence on and periodically monitor your
fund’s vendors
Ensure only eligible participants are admitted to bank funds
Include in any contract with a third party a requirement that
the vendor will prominently identify the bank that sponsors
the fund in any advertising and other materials.
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Rent-A-Trustee
Concerns
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OCC Bulletin #2011-11
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Principally applies to unaffiliated vendors such as
RIAs
Does not expressly apply to affiliates as we
assume banks and their affiliated RIAs have a
common interest not to unnecessarily assume
reputation, compliance, strategic or transaction
(operational) risks
Continues to allow outsourcing of certain CIF
functions to vendors, subject to longstanding OCC
CIF and vendor management guidance.
13
Recent AM Group
Guidance

OCC Bulletin 2010-37: “Self-Deposit of fiduciary
funds”

“Awaiting investment or distribution” – 12 CFR 9.10
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Authorized unless prohibited by applicable law
Rate must be consistent with applicable law
Sufficient qualifying collateral must be pledged at all times
Collateral must be controlled by two fiduciary employees
“Permanent investments” - 12 CFR 9.12
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Not permitted unless authorized by applicable law
Pledge not permitted – heightens concern about credit risk
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OCC Supervision Issues
15
Asset Management Exam
Issues
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Conflicts of Interest Issues
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OCC Bulletin 2008-5 (Divestiture of Certain
Asset Management Businesses)
Fee Arrangements
Affiliated/proprietary investments
Annual Review of Fiduciary Accounts
 OCC Bulletin 2008-10 (12 CFR 9.6(c))
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Risk Considerations
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Investment Issues
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Investment Objectives
Third Party Investment Managers
Unique Investment Products or Strategies
Investment Performance
Fixed Income Strategies
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Risk Considerations
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Other Supervision Issues
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Impact of earnings pressure on internal controls
 Staffing
 Compliance/Risk Management functions
 Audit Coverage
Regulation R
 Recordkeeping regulations
 Compensation and bonus plans
18
Comments and Questions
19
OCC Asset Management
Handbooks
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Asset Management
***Asset Mgt. Operations & Controls***
Collective Investment Funds
Conflicts of Interest
Custody Services
Insurance Activities
Investment Management Services
Personal Fiduciary Services
Retail Non-deposit Investment Products
Retirement Plan Services
Handbooks and Bulletins are available at www.occ.gov
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Contact information:
Joel Miller
Asset Management Group Leader
Phone: (202) 874-4493
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