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Flashcards in Trust Savior Deck (11)
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1
Q

What is the definition of a trust?

A

Fiduciary relationship in which one person is the holder of the title to the property subject to an equitable obligation to keep or use the property for the benefit of another. Trustees can be individual or corporate, but the person named must have the legal capacity to hold the property.

2
Q

What are the Uniform Interagency Trust Rating System (UITRS) components (Hint: MOECA)?

A
 Management
 Operations, Internal Controls, and Auditing
 Earnings
 Compliance
 Asset Management
3
Q

What is the purpose of a trust examination?

A

Determine if the banks operations or administration of accounts have given rise to possible or contingent liabilities (damages from lawsuits due to inappropriate handling of trusts) and to assess whether there are any direct liabilities or estimated losses (identify risk to the bank’s capital position).

4
Q

Trust Rating 1

A
  1. Administration of fiduciary activities is sound in every respect. Generally all components are rated 1 or 2. Any weaknesses are minor and can be handled in a routine manner by management. The institution is in substantial compliance with fiduciary laws and regulations. Risk management practices are strong relative to the size, complexity, and risk profile of the institution’s fiduciary activities. Fiduciary activities are conducted in accordance with sound fiduciary principles and give no cause for supervisory concern.
5
Q

Trust Rating 2

A
  1. Administration of fiduciary activities is fundamentally sound. Generally no component rating should be more severe than 3. Only moderate weaknesses are present and are well within management’s capabilities and willingness to correct. Fiduciary activities are conducted in substantial compliance with laws and regulations. Overall risk management practices are satisfactory relative to the institution’s size, complexity, and risk profile. There are no material supervisory concerns and, as a result, the supervisory response is informal and limited.
6
Q

Trust Rating 3

A
  1. Administration of fiduciary activities exhibits some degree of supervisory concern in one or more of the component areas. A combination of weaknesses exists that may range from moderate to severe; however, the magnitude of the deficiencies generally does not cause a component to be rated more severely than 4. Management may lack the ability or willingness to effectively address weaknesses within appropriate time frames. Additionally, fiduciary activities may reveal some significant noncompliance with laws and regulations. Risk management practices may be less than satisfactory relative to the institution’s size, complexity, and risk profile. While problems of relative significance may exist, they are not of such importance as to pose a threat to the trust beneficiaries generally, or to the soundness of the institution. The institution’s fiduciary activities require more than normal supervision and may include formal or informal enforcement actions.
7
Q

Trust Rating 4

A
  1. Fiduciary activities generally exhibit unsafe and unsound practices or conditions, resulting in unsatisfactory performance. The problems range from severe to critically deficient and may be centered around inexperienced or inattentive management, weak or dangerous operating practices, or an accumulation of unsatisfactory features of lesser importance. The weaknesses and problems are not being satisfactorily addressed or resolved by the board of directors and management. There may be significant noncompliance with laws and regulations. Risk management practices are generally unacceptable relative to the size, complexity, and risk profile of fiduciary activities. These problems pose a threat to the account beneficiaries generally and, if left unchecked, could evolve into conditions that could cause significant losses to the institution and ultimately undermine the public confidence in the institution. Close supervisory attention is required, which means, in most cases, formal enforcement action is necessary to address the problems.
8
Q

Trust Rating 5

A
  1. Fiduciary activities are conducted in an extremely unsafe and unsound manner. Administration of fiduciary activities is critically deficient in numerous major respects, with problems resulting from incompetent or neglectful administration, flagrant and/or repeated disregard for laws and regulations, or a willful departure from sound fiduciary principles and practices. The volume and severity of problems are beyond management’s ability or willingness to correct. Such conditions evidence a flagrant disregard for the interests of the beneficiaries and may pose a serious threat to the soundness of the institution. Continuous close supervisory attention is warranted and may include termination of the institution’s fiduciary activities.
9
Q

When do trust Earnings not need to be rated?

A

Earnings do not need to be rated if the department has less than $100MM in TA as of the examination date.

10
Q

What are the minimum requirements from Statement of Principles of Trust Department Management?

A

 Establish Trust Dept - Involvement by BOD in providing for the establishment and continuing operation of a trust department
 Separate Operations - of trust department must be separate and apart form every other department of the bank, with trust assets separated from the assets owned by the bank, and the assets of each trust account separated form the assets of every other trust account
 Separate Books - Maintenance of separate books and records for the trust department in sufficient detail to properly reflect all trust department activities

11
Q

What are the Reporting and Monitoring Procedures form SOP Trust Department Management?

A

 Trust Officer - BOD should designate a “trust officer” and define the officer’s responsibilities
 Trust Committee – 3 directors of bank & at least 1 who is not an active bank officer

o Quarterly meetings
o Approve & document the opening of accounts, all purchases/sales, or changes in trust assets, and the closing of trust accounts
o Provide for comprehensive review of all new accounts
o Provide for a review of the trust department account at least annually
o Keep comprehensive minutes
o Make periodic reports to the BOD of its actions

 Written Policies - Should have comprehensive written policies
 Legal Counsel - Should provide competent legal counsel to trust officers and trust committee
 Internal Controls - Provide for adequate internal controls
 Audit Program - Provide for an adequate audit of all fiduciary activities
 Review Committee Reports - Receive reports from the Trust Committee and record actions taken in its minutes
 Review Trust Exam Reports - Review trust exam reports