Yes, the bank is correct. A has the right, just as B does, to close the account. Neither has the right to unilaterlly change the terms of the contract that both executed.
From a trust officer's background, "retitling" accounts is a poor practice, even if all owners consent. It's particularly worrisome in the case of time deposits. The customers' lawyer has told them to transfer the assets to the corpus of the trust. Most time deposits clearly indicate on their face that they are non transferable. Simply file maintenancing the title leaves it open for a third party to question whether the asset was ever transferred to the trust.
I know it's easier for the bank, but easier for the bank isn't always better for the customer.
In this world you must be oh so smart or oh so pleasant. Well, for years I was smart. I recommend pleasant.