§ 550.8 - Funds awaiting investment or distribution.

(a) General. Funds held in a fiduciary capacity by a Federal savings association awaiting investment or distribution shall not be held uninvested or undistributed any longer than is reasonable for the proper management of the account.

(b) Use by Federal savings association in regular business. (1) Funds held in trust by a Federal savings association, including managing agency accounts, awaiting investment or distribution may, unless prohibited by the instrument creating the trust or by local law, be deposited in other departments of the Federal savings association, provided that the Federal savings association shall first set aside under control of the trust department as collateral security:

(i) Direct obligations of the United States, or other obligations fully guaranteed by the United States as to principal and interest;

(ii) Readily marketable securities of the classes in which state-chartered corporate fiduciaries are authorized or permitted to invest trust funds under the laws of the state in which such Federal savings association is located; or

(iii) Other readily marketable securities as the Office may determine.

(2) Collateral securities or securities substituted therefor as collateral shall at all times be at least equal in face value to the amount of trust funds so deposited, but such security shall not be required to the extent that the funds so deposited are insured by the Federal Deposit Insurance Corporation. The requirements of this paragraph (b)(2) are met when qualifying assets of the Federal savings association are pledged to secure a deposit in compliance with local law, and no duplicate pledge shall be required in such case.

(3) Any funds held by a Federal savings association as fiduciary awaiting investment or distribution and deposited in other departments of the Federal savings association shall be made productive.