We are an OCC bank in the midst of our exam cycle.

Since last exam, we had an ownership change and re-structured our committees of the Board. We have the Trust Committee overseeing the Trust department...includes 3 board members (out of 5 external), 1 internal board member (President), Trust Officer, and VP - Brokerage/Investments.

Concurrently, we have the Audit/Trust Audit Committee as required under 12 CFR 9.9(c). The membership includes the same 3 external directors as voting members and the entire (5-person) Risk Management Staff of the bank as non-voting members. The Audit/Trust Audit Committee reviews all internal and external audits, loan reviews, etc, as well as engaging and accepting the annual audit of the Trust Dept from a CPA firm.

We are being questioned on 12 CFR 9.9(c)(2) which requires the MAJORITY of the Trust Audit committee to be individuals who are not charged with approving fiduciary activities. Question is - is it appropriate / allowable to appoint the bank staff in the Risk Management Department as voting members of the Audit/Trust Audit Committee? Or do we need to re-build our committee structure of board members in order to comply?

Exit meeting later today - this came up first thing this morning...any help MUCH appreciated!

It doesn't look as if you are in compliance. First of all, your external board members are also on the committee charged with overseeing Trust, and they are not in the majority on the audit committee. Why is the entire Risk staff on the committee as voting members? Perhaps the Risk Manager can be on the committee and the others can attend as needed to report, etc. But you still need to deal with the audit directors being on the other committee, it seems to me.

(c) Fiduciary audit committee. A national bank's fiduciary audit committee must consist of a committee of the bank's directors or an audit committee of an affiliate of the bank. However, in either case, the committee:
(1) Must not include any officers of the bank or an affiliate who participate significantly in the administration of the bank's fiduciary activities; and
(2) Must consist of a majority of members who are not also members of any committee to which the board of directors has delegated power to manage and control the fiduciary activities of the bank.

Agreed, we are out of compliance. Trying to figure out exactly how to re-structure given that the other 2 external directors don't want to sit on committees - and they have the power, given that they are the true owners.

Entire Risk-Management staff sits on Audit Committee as NON voting members specifically to report. Even me, as Risk Management Officer, joining committee, doesn't put us in a correct majority...

Just trying to figure out ways to make this work without expanding the board...and not seeing a ton of options.

It doesn't look like you have enough board members to make this work.

THAT was my thought/fear...thank you so much!

"given that the other 2 external directors don't want to sit on committees"

Owners or not - they have no business being directors of the bank. They might want to re-read the OCC Director's Handbook:

In addition to the citizenship and residency requirements contained in 12 USC 72, the qualifications of a candidate seeking to become a member of the board of directors of a national bank include

o Willingness and ability to commit the time necessary to prepare for and regularly attend board and committee meetings.

It's been awhile, but it used to be a violation of Article 9 for a director to be on both the Trust Committee and the Audit Committee.

Still is. See above.

(c) Fiduciary audit committee. A national bank's fiduciary audit committee must consist of a committee of the bank's directors or an audit committee of an affiliate of the bank. However, in either case, the committee:
(1) Must not include any officers of the bank or an affiliate who participate significantly in the administration of the bank's fiduciary activities; and
(2) Must consist of a majority of members who are not also members of any committee to which the board of directors has delegated power to manage and control the fiduciary activities of the bank.

KB - have I mentioned lately how bloody happy I am that we got rid of our Trust Dept about 5 years ago? No more trust audits. YAY!!!!

I agree. What a pain.

I'm not sure I follow where it is a "violation", based on the above?

The EIC and Examiner handling trust told us under 12 CFR 9.9(c)(1), that applies to the Trust Officer, not the external directors sitting on the Trust Committee? Given that our director-ship are also officers of an affiliate, there is a concern there that we are being mindful of but we are modifying the membership of the trust committee in order to meet the reg requirements.

Thanks to everyone for their responses!