Several months after national banks and trust companies won the right to perform as trustees in any state, state-chartered institutions and their regulators are defending their turf.
The Conference of State Bank Supervisors last week distributed to its members a draft proposal designed to help them maintain authority over out- of-state institutions operating or marketing trust management in their respective states.
The conference wants each state banking commissioner to take the proposal to his or her state legislature to be enacted into law.
The purpose of the proposal is twofold. The group wants to "ensure a competitive environment" for state-chartered institutions and make sure state regulators maintain the "authority to protect their citizens," says spokeswoman Ellen Lamb.
The proposal suggests allowances on three levels. State-chartered banks and trust companies could market and solicit across state lines; open representative offices outside home states; or have full-scale trust management in other states.
The proposal comes in the wake of a letter issued to Banc One Corp. by the Office of the Comptroller of the Currency late last year. In that document, the OCC determined national banks and trust companies can perform as trustees in any state.
Similarly, this summer the Office of Thrift Supervision issued an interpretive letter granting nationally chartered thrifts with trust powers the ability to market their services anywhere they like.
Many state regulators take exception to the federal regulators' decisions.
"There are certain aspects of that letter that appear to preempt state law. We're not sure we agree with that letter on a legal basis,"said Randall S. James, deputy commissioner of the Texas State Banking Department.
Mr. James added that because trusts are handled by local courts that apply local probate laws, states should maintain authority over their trust companies. The chairman of Texas' state house is preparing to introduce a bill this January similar to the proposal by the national supervisors group.
"It's not a question of holding back companies, but finding a way to make sure state laws are upheld," Mr. James said.
The state regulators may also want to prevent state institutions from switching to federal charters, according to James D. Kemp, a trust and investment management consultant in Dallas.
He added that the legislation proposed at the supervisors' national meeting would help nontraditional trust companies whose parent corporations already have customers and presences in several states.
