July 3, 1990
TO: INSTITUTIONAL FUNDS COMMITTEE NO. 1-90
RE: COMPTROLLER PROPOSES CHANGES TO RULES GOVERNING INVESTMENT
OF IDLE TRUST FUNDS
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The Office of the Comptroller of the Currency has proposed
amendments to its regulations governing idle funds awaiting
investment or distribution by national bank fiduciaries. A copy
of the proposal is attached.
The proposal is meant to clarify how soon idle funds must
be made productive and what rate of return must be obtained.
Specifically, funds would be required to be invested "as
expeditiously as possible" and, in any event, within five days.
In addition, banks would required to obtain "a competitive market
rate" on funds awaiting investment. The proposal would not
change the provision of the OCC regulations that permits idle
funds to be invested in the fiduciary bank's deposit accounts
unless prohibited by the trust instrument or local law.
Perhaps the most interesting aspect of the proposal is its
clarification of the role of local law. The proposed standards
for investing idle funds would apply "[u]nless otherwise provided
by specific reference in the governing instrument or by language
in local statutory law which specifically refers to the
investment of trust funds awaiting investment or distribution."
Thus, contrary judicial decisions or case law would not govern.
Comments on the proposal are due by August 27.
Craig S. Tyle
Associate General Counsel
Attachment