About Trust Banks
What is a trust?
A trust is an arrangement wherein a person (the settlor) transfers the title of property such as money or land to a trustworthy person (the trustee) in accordance with a trust agreement or will and the trustee administers or disposes of the property (trust property) on behalf of the beneficiaries specified by the settlor in accordance with the trust objectives established by the settlor. As its name literally implies, a trust is built on a strong fiduciary relationship between the settlor and the trustee. In Japan, general provisions concerning the trust system are prescribed by law in the Trust Act.
With the use of trusts, a trustee can harness their expertise in asset management and ensuring the safe and sound preservation of property. Also, owing to the fact that the rights of beneficiaries (beneficiary rights) are apportionable and negotiable, they are actively utilized today as a vehicle for asset liquidation.
The trust concept can be traced as far back as ancient Egypt and ancient Rome, but the trust system we are familiar with today originated in medieval England and was introduced into Japan during the Meiji period. For around 100 years, trusts gave rise to different types of products and services by responding flexibly to the demands of the times, much like a living thing. In more recent times, the functions of trusts have been utilized in a broad range of fields, not just finance.
Mechanism
Social and environmental initiatives powered by trust functions
Social contributions with the use of trust functions—Example of charitable trusts
Charitable trusts are part of a system whereby property is entrusted to a trust bank to be administered and managed for the purpose of achieving predefined public interest objectives. For example, an individual may wish to provide their own assets for the public interest (social benefits), or a corporation might want to return a portion of its profits to society. Charitable trusts are used widely in many fields; for instance, for the payment of scholarships, research grants in the natural sciences and humanities, social welfare, animal protection, urban environmental improvement, protection of the natural environment, and even for promoting international cooperation and exchange.
Nature conservation with the use of trust functions—Example of will trusts
Will trusts involve the entrustment of property to a trust bank by the testator for the purpose of administration and management, but in recent years, more and more people have considered leaving their estate for the benefit of society. Trust banks play a part in this arrangement by directing such social contribution money to various organizations that work to protect the natural environment.
Environmental initiatives with the use of trust functions—Example of emission credit trust beneficiary rights
Amid heightened interest in global warming, more and more companies are actively implementing environmental protection measures. The trading of emission credit is usually carried out in large quantities, but by using a trust mechanism to convert it into trust beneficiary rights which is small-lot products, more companies can utilize them as a way to help lower greenhouse gas emissions.
Trust banks
The banking services of trust banks, such as deposits, loans, and foreign exchange, are the same as the city and regional banks. What sets a trust bank apart from an ordinary bank is its capacity to take on "trust" services from clients.
This service entails the management and administration of a client's property (money, securities, real estate, etc.). Also, a corporate client might entrust the management of its corporate pension to a trust bank. In short, a trust bank safeguards the valued property of its clients by providing a whole host of services in the areas of banking and trusts.
Trust business | Concurrently engaged in trust business | Banking business |
---|---|---|
Pension trusts Securities trusts (investment trusts) Asset liquidation (monetary claims, real estate, etc.) |
Real estate-related services ( brokerage for buying and selling, property valuation, etc.) Stock transfer agency services (shareholder list management, etc.) Inheritance-related services (will execution, estate liquidation, etc.) |
Deposits Loans Foreign exchangeAuxiliary services (securities trading, derivatives transactions, etc.) |
Main products and services of trust banks
Investment trusts
An investment trust solicits funds from individual investors and has a specialist (settlor) invest in securities, real estate, and other asset classes on behalf of the investors to distribute the investment returns to investors (beneficiaries). The trust bank manages the investment trust assets as the trustee.
Will trusts, estate liquidation, and inheritance consulting
In addition to will trust services ranging from consulting regarding will drafting, the custody of wills, and the execution of wills related to property, trust banks also provide estate liquidation services, mainly involving the creation of inheritance asset lists and estate partitioning procedures.
Pension business
Based on Employees' Pension Funds, defined benefits pension plan, and defined contribution pension plan, trust banks provide comprehensive services in this area, from the design of pension plans through to administration and management of pension assets, pension actuarial valuation, management of plan participants and recipients, and payment of benefits.
Asset formation trusts
Trust banks promote planned wealth creation by workers and offer asset formation trusts, asset formation pension trusts, asset formation housing trusts, and other products based on system for the promotion of wage earners' property accumulation, which was designed to help stabilize people's lives.
Liquidation of assets
Trust banks can separate monetary claims, such as mortgage loans with financial institutions, and company-owned assets like real estate, and package them into financial instruments with their value and cashflow serving as the underlying assets. By doing so, trust banks provide various investment opportunities to investors and support financing and the improvement of financial positions of companies.
Stock transfer agency services
As shareholder list manager for stock-issuing companies, trust banks provide consulting services concerning corporate stock practices, including shareholder list management, cash dividend calculations, acquisition of shares constituting less than one unit, filing of general shareholder meeting documents, and complying with amended legislation. They also provide consulting regarding investor relations and takeover defense measures.
Real estate services
Trust banks provide real estate brokerage and subdivision sales, consulting on effective utilization of property owned by corporations, property management, and real estate appraisals.
Information about the financial aspects of trust banks.