Earlier this year the Comptroller of the Currency updated rules for the chartering of national trust banks. The OCC has approved or conditionally approved at least 17 national trust bank charters in the past 10 months. Most of the incumbent banking associations objected to the rule changes, for varied reasons, with the Bank Policy Institute (BPI) considering a lawsuit against the OCC, although it has not proceeded. Last week the Independent Community Bankers of America (ICBA) filed its own suit. The heart of its argument is that the rule change allows crypto trust banks to be licensed for similar activities to banks with whom they compete, without the same compliance burdens and Community Reinvestment Act requirements.
“Under the correct reading of the NBA [National Bank Act], the OCC has no authority to charter limited-purpose national trust banks that are neither depository nor fiduciary,” says ICBA in its complaint. It goes on to outline three types of banks that the OCC can charter: a deposit taking institution, a bank that services other banks, or a trust bank engaging in fiduciary activities. In its view, the OCC is trying to create a fourth type.
Many of the recent trust bank approvals do not appear to perform significant fiduciary activities, with custody considered a non-fiduciary activity. In light of this lack of fiduciary core functions, ICBA asserts that risky crypto firms are entering the banking system under light regulation. The complaint asks the court to declare the rule unlawful and set it aside entirely, along with Interpretive Letter 1176, which Comptroller Gould authored in January 2021 while serving as Senior Deputy Comptroller.
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