S. Alan Rosen, Esq.
Horgan, Rosen, Beckham and Coren
Suite 2000
3900 West Alameda
Toluca Lake, California 91505

Dear Mr. Rosen:

This is in response to your correspondence requesting, on behalf of North American Trust Company, San Diego, California ("NATC"), a California state-chartered trust company, an interpretive ruling in connection with the proposed conversion of NATC into a state-chartered commercial bank with trust powers. Specifically, you request a determination that after the proposed conversion, NATC will qualify for the trust company exemption from the definition of "bank" in the Bank Holding Company Act ("BHC Act") (12 U.S.C. 1841(c)(2)(D)).

Your letter states that NATC specializes in self-directed retirement accounts. NATC proposes to convert its charter to that of a commercial bank with trust powers so that it can offer FDIC-insured money market deposit accounts for its trust customers. You indicate that NATC would not offer demand deposits or make any loans, and would limit its non-fiduciary deposit taking to no more than 1 percent of its total deposits, with these deposits being made by affiliates of NATC. You believe that under these circumstances, NATC would qualify for FDIC insurance as well as for the trust company exception to the definition of "bank" in the BHC Act.¹

In connection with this proposal you have stated that NATC would take the following actions:

1. NATC has established and will continue to maintain one or more deposit accounts at unrelated third-party institutions to be used for making payments on behalf of pension plans to third parties, including making investments and distributions directed by pension plan managers ("NATC Trust Account"). The NATC Trust Accounts will be commingled accounts in the name of NATC as trustee for the various pension plans. NATC will maintain in the NATC Trust Accounts sufficient trust funds to meet the anticipated third-party payment instructions of the pension plans. Thus, payments to third parties for investments by pension plans and distributions to plan members will be accomplished through checks drawn on the NATC Trust Accounts against funds maintained for that purpose by NATC as trustee.

2. When pension plan managers direct that pension plan funds be maintained at NATC for any reason, such fiduciary funds will be maintained at NATC as time deposits.² In addition, substantially all the deposits maintained at NATC (at least 99% of all deposits at NATC) will be deposits held in a fiduciary capacity, including the fiduciary time deposits maintained by the pension plans.

3. From time to time there may be insufficient funds maintained at the NATC Trust Accounts to meet a particular investment or distribution directive of a pension plan manager. Under such circumstances, NATC will transfer funds of that pension plan from a fiduciary account at NATC to the appropriate NATC Trust Account in order to carry out the investment or distribution directive; provided, however, that any transfer will be made from the proceeds of time deposits maturing in accordance with their term, which would be no fewer than seven days, and promptly upon maturity, or time deposits that are subject to a minimum seven day notice requirement, before such funds are transferred from the fiduciary account at NATC to the appropriate NATC Trust Account.

4. NATC will not accept demand deposits or transaction accounts, nor will NATC make commercial loans.

5. NATC will not obtain payment or payment-related services from the Federal Reserve or exercise discount or borrowing privileges with the Federal Reserve.

6. NATC will not permit its insured deposits to be offered or to be marketed by or through an affiliate.

This letter is limited to the specific transaction and circumstances described above, and any change in the transaction or circumstances could lead to a different conclusion. Please inform staff of the Federal Reserve Bank of San Francisco upon consummation of the proposed transaction. If you have any questions concerning this letter, you may contact me at (202) 452-3625 or John Soboeiro at (202) 452-3838.

Very truly yours,

(signed) Oliver I. Ireland

Oliver I. Ireland

cc: Kenneth Binning,
         Federal Reserve Bank of San Francisco

Footnotes 1. In order to be eligible for deposit insurance under the Federal Deposit Insurance Act ("FDI Act"), state banks, including trust companies, must engage in the business of receiving deposits other than trust funds. See 12 U.S.C. � 1815(a). Return to text 2. All time deposits will be subject to a minimum seven day notice requirement before such funds may be transferred from the fiduciary account. Return to text