OCC Proposes Clarifying National Trust Bank Powers, Could Clarify More

The OCC issued a proposed rule that would amend its chartering rules to better match the National Bank Act's language and seeks to clarify what national trust banks can do. It would specify that national banks whose operations are limited to trust company activities may engage in nonfiduciary activities alongside their fiduciary businesses. The change would attempt to make it easier for these institutions to offer services like custody and safekeeping—and arguably more—without being forced to act like traditional banks.

Comments are due by February 11, 2026.

Key Takeaways

• Broadens the current regulation's language. The proposed rule would update the OCC's chartering regulation, 12 C.F.R. § 5.20, to say that a special purpose national bank, including a national trust bank, may limit its activities to "the operations of a trust company and activities related thereto." This change would eliminate the narrower and potentially more confusing "fiduciary activities" phrasing of the current regulation, which the OCC says was never intended to limit activities.
• Still lacks key clarity. The proposed broader language also raises questions about (1) what precise nonfiduciary and related activities are permissible, and (2) whether those activities could entail payments activities, including money transmission without state licensure based on National Bank Act preemption. Given the broader proposed language, money transmission might indeed be a permitted activity both today (national trust banks for payroll-related activities appear to have taken this approach) as well as under the proposed changes. It would help if the OCC would expressly clarify this point.
• Addresses the application of the core banking functions test. The proposed rule would clarify that the "core banking functions" test (i.e., receiving deposits, paying checks, or lending money) apply to special purpose banks that conduct activities other than trust-company operations and related activities—and not to trust-company-limited national banks simply because they perform nonfiduciary but related services (e.g., custody/safekeeping).
• Provides consistency in the regulation. The proposed rule makes a conforming change to 12 C.F.R. § 5.20(l) so the special-purpose charter procedures use the same "trust company operations and activities related thereto" language as in section 5.20(e).

Prompted by the Need for Clarification

The OCC frames the proposed rule as only a clarification aligning the regulation more closely with the provisions in 12 U.S.C. § 27(a) and preventing any misreadings that could incorrectly constrain national trust bank activities. The OCC views those fiduciary powers as coming from 12 U.S.C. § 92a independently, not the general business of banking powers for a national bank in 12 U.S.C. § 24(Seventh). The proposal would neither expand nor contract the OCC's chartering authority, but rather eliminate any potential confusion created by the 2003 regulatory text and reinforce reliance on statutory terms.

Under the current regulation, a special purpose national bank may limit its activities to "fiduciary activities" or to other activities within the business of banking, and if it conducts activities other than fiduciary activities, it must perform at least one of three core banking functions: receiving deposits, paying checks, or lending money. The proposed rule would make clear that this "core banking" requirement does not apply to national trust banks simply because they perform nonfiduciary activities that are related to their trust company operations (such as custody and safekeeping).

*The same language would also be used in 12 C.F.R. § 5.20(e)(1)(i).

The OCC hopes that in replacing "fiduciary activities" with "the operations of a trust company and activities related thereto" it will reduce regulatory uncertainty for national trust banks. The change should also clarify that nonfiduciary activities can be permissible when they are related to trust company operations and in turn may lower legal and compliance friction and support consistent supervision and charter planning. State supervisors will likely challenge the proposed rule; they typically resist an expansive view of National Bank Act powers and federal preemption by the OCC, particularly after the passage of the Dodd-Frank Act.

The OCC notes the changes to the rule should help avoid inadvertent pressure to add deposit-taking, check-paying, or lending solely to satisfy a "core banking" requirement that was aimed at other special purpose bank models—supporting charter structures designed for fiduciary/trust-based business lines. The proposed rule would also promote clearer, more consistent application of the regulation for filers and stakeholders by using the same statutorily aligned terminology in both the chartering authority provision and the special-purpose procedures provision.

The Question Remains: What Activities Can National Trust Banks Engage In?

The proposed language clarifies that the scope of a national trust bank's activities is broad. But it doesn't answer which activities they can engage in if the proposal is finalized as written. Critically, do those activities include payments activities? The OCC's 2021 Interpretive Letter 1176 leads us to believe they do.

As the OCC explains in IL 1176, Part 9 of its regulations implements 12 U.S.C. § 92a. Section 9.2(e) of that regulation defines "fiduciary capacity to include the activities listed in 12 U.S.C. § 92a(a)" as well as the activities of:

• A transfer agent;
• A custodian;
• Investment adviser;
• One with any capacity in which the bank possesses investment discretion on behalf of another; and
• One with any other similar capacity that the OCC authorized pursuant to 12 U.S.C. § 92a.

The OCC continues that these roles and functions (which are enumerated in statute and regulation) are considered "being performed in a fiduciary capacity."

It appears that under the OCC's interpretation and current market practice that to perform these functions, a national trust bank needs to be able to conduct these payment services to provide these other services in a convenient and useful manner. Turning to the proposed rule, such activities appear to be included in "the operations of a trust company and activities related thereto." Are they the operations of a trust company or activities related thereto? It's unclear. Are they in fact permissible? They appear to be.

Further clarity from the OCC in the proposed rule itself on this issue would clarify a lot.

Why This Matters

National trust banks are often used to provide fiduciary services such as acting as a trustee or an executor and for custody of assets, but many of these custody and safekeeping services are nonfiduciary in nature.

The current rule's wording has created uncertainty about whether national trust banks must also perform core banking functions, even when their business is focused on non-fiduciary trust and custody activities.

By returning to the statutory language "operations of a trust company and activities related thereto," the OCC seeks to base its interpretation on the words of the statute, update its regulations accordingly, and confirm that national trust banks can conduct a broad range of related nonfiduciary activities without having to take deposits or make loans.

Our Take

The proposed rule comes at a time when many entities are exploring or actively applying for national trust bank charters. That reflects both a change in policy as well as developments under the GENIUS Act.

The U.S. financial regulatory framework—particularly charters and the regulatory perimeter—appears outdated and could better reflect new ways of providing financial services in a market made up of banks, their nonbank affiliates, as well as unaffiliated nonbank entities and bank-like entities. This is a step towards a more modern framework. While the OCC likely expects a challenge from the states, it has anchored its reasoning in the statute, which is a more cautious and defensible approach.

More could be clarified. For a pro-growth, pro-chartering, pro-innovation policy like Treasury and the OCC are pursuing, more clarity is needed for businesses to devote the time and resources needed to pursue the available options. We expect all these issues to be fleshed out in the public comments.

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Max Bonici, Steve Gannon, and Mimi Lynham have extensive experience spanning financial compliance, regulatory counsel, and enforcement matters, providing insights to help clients navigate complex challenges in the financial services sector. For more insights, contact Max, Steve, and Mimi or another member of Davis Wright Tremaine's financial services team or sign up for our alerts.