ALEXANDRIA, Va. – All signs are go for Members Trust Co. (MTC) to obtain a national trust charter that could potentially serve members outside of Florida. MTC, Suncoast Schools Federal Credit Union’s (SSFCU) credit union service organization was formed in 1987 and currently exists under a state charter serving 1,500 credit union members at SSFCU and two other Florida credit unions. NCUA Board officials met on July 26 to consider changes to several matters including a ruling on amending statute 12 CFR 712.6 of the Federal Credit Union Act which allows a CUSO to act as a corporation, established and maintained under state but not federal law. The board agreed with the 21 commenters that “depository financial institution” should not include a financial institution principally engaged in the business of providing trust services, and which holds only such deposit as is required for FDIC insurance. Yet, the board chose not to include a regulatory definition because it “might not adequately address issues that will be considered in the FDIC’s rulemaking or in the pending litigation.” As necessary, NCUA’s Office of General Counsel may provide further interpretation, in addition to that stated in this preamble. MTC would be the first nationally-chartered trust company owned by a CU and could proceed with opening interstate branches for estate planning, will preparation services, fiduciary services and asset management at credit unions outside of Florida. MTC has $300 million in assets under management. SSFCU has $2.6 billion in assets and 250,000 members. For Tom Dorety, president/CEO of SSFCU, the news is good for them but great for all credit unions. “This provides an option where (federal) credit unions can provide members with trust services without the individual credit union having to go through the cumbersome process of obtaining a trust charter,” Dorety said. Dorety said the NCUA ruling is just the first step and doesn’t expect to see an end to its national charter process until the beginning of 2002. The next phase is to work with the Office of Thrift Supervision, the agency that regulates trust companies and the Federal Deposit Insurance Corporation to make sure that charter qualifications are met and requirements for limited deposits are established in concordance with the Federal Deposit Insurance Act. “We’re hoping to prevail assuming everything goes through the channels smoothly,” he said. In March, NCUA reviewed 712, determined that the Federal Credit Union Act does not prohibit a federal structure if the trust company is not a depository institution and revised the rule to include federally-chartered corporations. “The NCUA’s long-standing interpretation of financial institution has been that it means a deposit taking institution,” the ruling read. “The CUSO regulation reflects this policy and states that FCUs may not acquire control of another depository financial institution.” The board pointed out that trust services have been a permissible activity for CUSOs for almost 20 years. On related issues, one commenter suggested that NCUA be allowed to charter a federal credit union’s trust powers while another recommended allowing a CUSO to be established under foreign law so that it could serve foreign nationals. NCUA said both “suggestions are outside of the scope of this rulemaking process.” Meanwhile, state-chartered credit unions in California will have to wait until next year’s legislative session to find out if they can offer in-house trust services to members. The California Credit Union League met with the Senate Committee on Finance, Investment and International Trade on July 5 to propose AB 684, authored by Assemblywoman Christine Kehoe (D-San Diego) that would allow a state-licensed credit union with its main office in California to offer in-house trust services if its bylaws permit it to do so. The bill also proposes to amend the current financial code to add credit unions to the list of financials that can offer such services. Presently, corporations, industrial banks, commercial banks and foreign or state banks that maintain a branch office in the state are permitted to engage in trust services. There were two “yes” votes approving the bill and no “no” votes, said Monica Cisneros, the league’s legislative and regulatory analyst. AB 684 needed five “yes” votes to progress to the next step. The league asked for and was approved for reconsideration and the bill will pick up where it left off with the Senate committee next year. “There was one question about can credit unions raise capital in other ways if something should happen to the trust company,” Cisneros said. “Last year, we passed AB 2503 which says there are other ways to raise capital but the Department of Financial Institutions’ commissioner would have to approve them.” The league is hoping AB 2503 will reassure Senate members that credit unions have contingency plans should an in-house trust company not raise enough capital. -

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