[Federal Register Volume 61, Number 150 (Friday, August 2, 1996)]
[Rules and Regulations]
[Pages 40293-40311]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-19400]
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DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
12 CFR Part 26
[Docket No. 96-15]
RIN 1557-AB39
FEDERAL RESERVE BOARD
12 CFR Part 212
[Docket No. R-0907]
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 348
RIN 3064-AB71
DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
12 CFR Part 563f
[Docket No. 96-62]
RIN 1150-AA95
Management Official Interlocks
AGENCIES: Office of the Comptroller of the Currency, Treasury; Board of
Governors of the Federal Reserve System; Federal Deposit Insurance
Corporation; Office of Thrift Supervision, Treasury.
ACTION: Joint final rule.
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SUMMARY: The Office of the Comptroller of the Currency (OCC), Board of
Governors of the Federal Reserve System (Board), Federal Deposit
Insurance Corporation (FDIC), and Office of Thrift Supervision (OTS)
(collectively, the agencies) are revising their rules regarding
management interlocks. This final rule conforms the interlocks rules to
recent statutory changes, modernizes and clarifies the rules, and
reduces unnecessary regulatory burdens where feasible, consistent with
statutory requirements. In so doing, it reflects comments received on
the proposed rule and the agencies' further internal considerations.
EFFECTIVE DATE: This joint rule is effective October 1, 1996.
FOR FURTHER INFORMATION, CONTACT: OCC: Sue E. Auerbach, Senior
Attorney, Bank Activities and Structure Division (202) 874-5300; Emily
R. McNaughton, National Bank Examiner, Credit & Management Policy (202)
874-5170; Jackie Durham, Senior Licensing Policy Analyst (202) 874-
5060; or Mark J. Tenhundfeld, Senior Attorney, Legislative and
Regulatory Activities (202) 874-5090, 250 E Street, SW., Washington, DC
20219.
Board: Thomas M. Corsi, Senior Attorney (202/452-3275), or Tina
Woo, Attorney (202/452-3890), Legal Division, Board of Governors of the
Federal Reserve System. For the hearing impaired only,
Telecommunication Device for Deaf (TDD), Dorothea Thompson (202/452-
3544), Board of Governors of the Federal Reserve System, 20th and C
Streets, NW., Washington DC 20551.
FDIC: Curtis Vaughn, Examination Specialist, Division of
Supervision, (202) 898-6759; or Mark Mellon, Counsel, Regulation and
Legislation Section, Legal Division, (202) 898-3854, Federal Deposit
Insurance Corporation, 550 17th Street, NW., Washington, DC 20429.
OTS: David Bristol, Senior Attorney, Business Transactions
Division, (202) 906-6461; or Donna Deale, Program Manager, Supervision
Policy, (202) 906-7488.
SUPPLEMENTARY INFORMATION:
Background
Section 303 of the Riegle Community Development and Regulatory
Improvement Act of 1994 (CDRI Act)
Section 303(a) of the CDRI Act (12 U.S.C. 4803(a)) requires the
agencies to review their regulations in order to streamline and modify
the regulations to improve efficiency, reduce unnecessary costs, and
eliminate unwarranted constraints on credit availability. Section
303(a) also requires the agencies to work jointly to make uniform all
regulations and guidelines implementing common statutory or supervisory
policies. The agencies have reviewed their respective management
interlocks regulations with these purposes in mind and are amending the
regulations in ways designed to meet the goals of section 303(a).
The agencies have made the following changes to their respective
management interlocks rules in order to comply with the mandate of
section 303(a):
The final rules revise the definition of ``senior
management official'' to eliminate uncertainty as to when an employee
of a depository institution will be considered to be a senior
management official for purposes of the Depository Institution
Management Interlocks Act (12 U.S.C. 3201-3208) (Interlocks Act).
Moreover, the final rules conform this definition to definitions of
similar terms used elsewhere in the agencies' regulations.
The final rules revise the definition of ``representative
or nominee'' to clarify
[[Page 40294]]
that the agencies will determine that a person is acting as a
representative or nominee on behalf of another person only when there
is an agreement, express or implied, obligating the first person to act
on the second person's behalf with respect to management
responsibilities.
The final rules reflect a reinterpretation of the
Interlocks Act by the agencies that permits management interlocks
within a relevant metropolitan statistical area (MSA) when either of
the depository institutions in the MSA has assets of less than $20
million (the agencies previously interpreted the Interlocks Act to
permit interlocks between unaffiliated institutions in MSA only if both
depository institutions have assets of less than $20 million). This
expands the pool of available managerial talent for small depository
institutions.
In implementing the Interlocks Act's ``regulatory standards''
exemption (Regulatory Standards exemption) and the exemption under a
``management official consignment program'' (Management Consignment
exemption), the final rules contain certain presumptions and define key
terms so as to eliminate unnecessary burdens.
The final rules remove the provision concerning statutorily
grandfathered management interlocks, given that it is unnecessary in
light of the changes made to the Interlocks Act by the CDRI Act.
The agencies believe that these changes will streamline and modify
their respective management interlocks regulations, thus furthering the
goals of section 303 of the CDRI Act. These changes are explained more
fully in the discussion of the final rule and comments received.
Summary of Statutory Changes
The CDRI Act amended the Interlocks Act by removing the agencies'
broad authority to exempt otherwise impermissible interlocks and
replacing it with the authority to exempt interlocks under more narrow
circumstances. The CDRI Act also required a depository organization
with a ``grandfathered'' interlock to apply for an extension of the
grandfather period if the organization wanted to keep the interlock in
place.1
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\1\ The agencies completed their review of requests for
extensions by March 23, 1995, as directed by the statute. Therefore,
the provision regarding extending the grandfather period is moot for
purposes of this regulation.
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Pursuant to the changes made by the CDRI Act, a depository
institution seeking an exemption from the Interlocks Act's restrictions
must qualify either for a Regulatory Standards exemption or a
Management Consignment exemption. An applicant seeking a Regulatory
Standards exemption must submit a board resolution certifying that no
other candidate from the relevant community has the necessary expertise
to serve as a management official, is willing to serve, and is not
otherwise prohibited by the Interlocks Act from serving. Before
granting the exemption request, the appropriate agency must find that
the individual is critical to the institution's safe and sound
operations, that the interlock will not produce an anticompetitive
effect, and that the management official meets any additional
requirements imposed by the agency. Under the Management Consignment
exemption, the appropriate agency may permit an interlock that
otherwise would be prohibited by the Interlocks Act if the agency
determines that the interlock would: (1) improve the provision of
credit to low- and moderate-income areas; (2) increase the competitive
position of a minority- or women-owned institution; or (3) strengthen
the management of a newly chartered institution or an institution that
is in an unsafe or unsound condition (see text following ``Management
Consignment exemption'' in this preamble for a discussion regarding
interlocks involving a newly chartered institution or an institution
that is in an unsafe or unsound condition).
The Proposal
On December 29, 1995, the agencies published a joint notice of
proposed rulemaking (proposal) (60 FR 67424) to implement these
statutory changes. In addition, the proposal permitted interlocks
involving two institutions located in the same relevant metropolitan
statistical area (RMSA) if the institutions were not also located in
the same community and if at least one of the institutions had total
assets of less than $20 million. Finally, the proposal streamlined and
clarified the agencies' interlocks rules in various respects.
The Final Rule and Comments Received
The agencies received a total of 26 comments,2 some of which
were sent to more than one agency. Commenters overwhelmingly supported
the proposal. A few commenters, while supporting the proposal,
suggested that the agencies make additional changes as discussed later
in this preamble. Most of the provisions in the proposal received
either no comments or uniformly favorable comments. Accordingly, except
where noted in the text that follows, the agencies have adopted without
revision the changes to their respective interlocks rules that were set
forth in the proposal.
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\2\ The Board received 10 comments from the public, while the
OCC, FDIC, and OTS received 6, 6, and 4, respectively.
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The following discussion summarizes the amendments to the agencies'
management interlock rules and the comments received.
Authority, Purpose, and Scope
This section in the agencies' final rules identifies the Interlocks
Act as the statutory authority for the management interlocks
regulation. It also states that the purpose of the rules governing
management interlocks is to foster competition between unaffiliated
institutions. Finally, this section identifies the types of
institutions to which each agency's regulation applies. The OCC rule
uses the term ``District bank'' to describe banks operating under the
Code of Laws of the District of Columbia. (See definition of ``District
bank'' at Sec. 26.2(k).)
Definitions
Anticompetitive effect
The final rules define the term ``anticompetitive effect'' to mean
``a monopoly or substantial lessening of competition,'' a definition
derived from the Bank Merger Act (12 U.S.C. 1828(c)). The term
``anticompetitive effect'' is used in the Regulatory Standards
exemption. Under the Regulatory Standards exemption, the appropriate
agency may approve a request for an exemption to the Interlocks Act if,
among other things, the agency finds that continuation of service by
the management official does not produce an anticompetitive effect with
respect to the affected institution.
The statute does not define the term ``anticompetitive effect,''
nor does the legislative history to the CDRI Act point to a particular
definition. The context of the Regulatory Standards exemption suggests,
however, that the agencies should apply the term ``anticompetitive
effect'' in a manner that permits interlocks that present no
substantial lessening of competition. By prohibiting an interlock that
would result in a monopoly or substantial lessening of competition, the
definition preserves the free flow of credit and other banking services
that the Interlocks Act is designed to protect. Moreover, use of a
definition familiar to the banking industry enables the agencies to
accomplish the legislative purpose of
[[Page 40295]]
the Interlocks Act without imposing unnecessary regulatory burdens.
Area Median Income
The final rules define ``area median income'' as the median family
income for the MSA in which an institution is located or the statewide
nonmetropolitan median family income if an institution is located
outside an MSA. The term ``area median income'' is used in the
definition of ``low- and moderate-income areas,'' which in turn is used
in the implementation of the Management Consignment exemption.
Critical
The final rules define ``critical'' as ``important to restoring or
maintaining a depository organization's safe and sound operations.''
The term ``critical'' is used in the Regulatory Standards exemption.
Under that exemption, the appropriate agency must find that a proposed
management official is critical to the safe and sound operations of the
affected institution. 12 U.S.C. 3207(b)(2)(A).
Neither the statute nor its legislative history defines
``critical.'' The agencies are concerned that a narrow interpretation
of this term would nullify the Regulatory Standards exemption. If
someone were ``critical'' to the safe and sound operations of an
institution only if the institution would fail but for the service of
the person in question, the exemption would have little relevance,
because the standard would be impossible to meet. Given that Congress
clearly intended for the Regulatory Standards exemption to permit
interlocks under some circumstances, the question thus becomes how to
define those circumstances.
The agencies believe that the definition adopted in these final
rules is consistent with the legislative intent by insuring that only
persons of demonstrated expertise and importance to the institution's
safe and sound operations may serve pursuant to a Regulatory Standards
exemption.
Depository Institution
The final rules make no substantive change to the definition of
``depository institution.'' Two commenters noted that several of the
agencies interpret ``depository institution'' to include only those
institutions that accept deposits (see, e.g., Board Staff Opinion of
March 29, 1983, I F.R.R.S. 3-838; OCC No-Objection Letter No. 93-01,
October, 1993; FDIC Interpretive Letter No. 85-27), and requested that
the agencies clarify that these interpretations will not be affected by
the final rules. The OCC, Board, and FDIC note that the final rules
change neither the definition of ``depository institution'' nor the
application of that definition, and that the interpretations cited
remain accurate statements of the positions of these agencies.
Low- and Moderate-income Areas
The final rules define this term as a census tract (or, if an area
is not in a census tract, a block numbering area delineated by the
United States Bureau of the Census) in which the median family income
is less than 100 percent of the area median income. This term is used
in the Management Consignment exemption that permits an otherwise
impermissible interlock if the interlock would improve the provision of
credit to a low- and moderate-income area. The final rules clarify that
the agencies will evaluate whether an area is low- or moderate-income
by comparing the median family income for the census tract to be helped
(or, if there is no census tract, the block numbering area delineated
by the United States Bureau of the Census) with the area median income.
Income data will be derived from the most recent decennial census.
One commenter requested that the agencies use a cutoff of 120
percent of the area median income for determining whether an area is
``low- or moderate-income.'' This commenter suggested that this higher
cutoff would be consistent with the flexibility vested in the agencies
to implement the Management Consignment exemption in a way designed to
make it easier for institutions to serve economically disadvantaged
areas.
The agencies agree that a cutoff above 80 percent of the area
median income is appropriate, given that ``low-income'' is defined in
Title I, Subtitle A of the CDRI Act (titled ``Community Development
Banking and Financial Institutions'') to mean not more than 80 percent
of the area median income. 12 U.S.C. 4702(17). The agencies believe
that Congress, by using the term ``moderate-income'' in addition to
``low-income'' in section 338(b) of the CDRI Act (which created the
Management Consignment exemption), intended for that term to apply to
an area where the median family income exceeds the cutoff for low
income established elsewhere in the CDRI Act.
The agencies disagree, however, that a cutoff above 100 percent of
area median income is appropriate. The agencies continue to believe
that the 100 percent cutoff proposed best effectuates the Congressional
purpose of facilitating the flow of credit to economically
disadvantaged areas. Moreover, the threshold adopted is a commonly used
definition for ``moderate-income'' in other statutory provisions.3
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\3\ See, e.g., 12 U.S.C. 4502(10) (defining ``moderate-income''
in the context of the statute addressing government sponsored
enterprises).
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Management Official
The final rules define ``management official'' to include a senior
executive officer, a director, a branch manager, a trustee of an
organization under the control of trustees, or any person who has a
representative or nominee serving in such capacity. The definition
excludes (1) A person whose management functions relate either
exclusively to the business of retail merchandising or manufacturing or
principally to business outside the United States of a foreign
commercial bank and (2) a person excluded by section 202(4) of the
Interlocks Act (12 U.S.C. 3201(4)).
The final rules remove the phrase ``an employee or officer with
management functions,'' which appeared in the former rule. In its
place, the agencies have used the term ``senior executive officer'' as
defined by each agency in its regulation pertaining to the prior notice
of changes in senior executive officers, which implement section 32 of
the Federal Deposit Insurance Act (FDI Act) (12 U.S.C. 1831i) as added
by section 914 of the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 (FIRREA) (Pub. L. No. 101-73, 103 Stat. 183).
The agencies have made this change to eliminate the uncertainty and
attendant compliance burden created by the ambiguous term ``management
functions.'' The final rules incorporate specific illustrative examples
of positions at depository organizations that will be treated as senior
executive officers. See 12 CFR 5.51(c)(3) (OCC); 12 CFR 225.71(a)
(Board); 12 CFR 303.14(a)(3) (FDIC); and 12 CFR 574.9(a)(2) (OTS). The
agencies believe that these definitions will allow depository
organizations to identify impermissible interlocks with greater
certainty and thus will enhance compliance.
One commenter requested that the agencies amend the rules to expand
the exemption that exists for individuals whose management functions
relate to the business of retail merchandising or manufacturing. In
response to this request, the agencies carefully reviewed their
respective rules and concluded that the rules as drafted are
sufficiently broad to address the concerns expressed by the commenter.
This commenter also requested that the agencies clarify the procedures
by which someone may confirm that an organization complies
[[Page 40296]]
with the regulation. The agencies note that an organization may request
from the appropriate regulator at any time confirmation that a given
interlock complies with applicable law. The agencies have elected not
to impose any procedural requirements in the regulation on this type of
request.
Relevant Metropolitan Statistical Area (RMSA)
The final rules, like the former rules, define ``relevant
metropolitan statistical area (RMSA)'' as an MSA, a primary MSA, or a
consolidated MSA that is not comprised of designated primary MSAs.
However, unlike the former rules, the final rules clarify that this
definition will be used to the extent that the Office of Management and
Budget (OMB) defines and applies the terms MSA, primary MSA, and
consolidated MSA. This change reflects the fact that OMB defines
``consolidated MSA'' to include two or more primary MSAs. Given that a
consolidated MSA, by OMB's definition, is comprised of primary MSAs,
the reference to a consolidated MSA in the Interlocks Act and the
agencies' regulations is inappropriate. The final rules enable the
agencies to implement the statute in a way that complies with both the
spirit and the letter of the Interlocks Act.
Representative or Nominee
The final rules define ``representative or nominee'' as someone who
serves as a management official and has an obligation to act on behalf
of someone else. The final rules remove the rest of the definition that
appeared in the former rule, however, and insert in lieu thereof a
statement that the appropriate agency will find that someone has an
obligation to act on behalf of someone else only if there is an
agreement (express or implied) to act on behalf of another. This change
clarifies that the determination of whether someone serves a
representative or nominee will depend on whether there is a basis to
conclude that an agreement exists to act on someone's behalf.
Prohibitions
The former rules prohibited interlocks in the following three
instances. First, no two unaffiliated depository organizations may have
an interlock if they (or their depository institution affiliates) have
depository institution offices in the same community. Second, a
depository organization may not have an interlock with any unaffiliated
depository organization if either depository organization has assets of
$20 million or more and the depository organizations (or depository
institution affiliates of either) have depository institution offices
in the same RMSA.4 Third, if a depository organization has total
assets exceeding $1 billion, it (and its affiliates) may not have an
interlock with any depository organization with total assets exceeding
$500 million (or affiliate thereof), regardless of location.
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\4\ A community as that term is defined in the rules is smaller
than an RMSA. There may be several communities in one RMSA.
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The final rules amend the restriction applicable to institutions
with assets equal to or exceeding $20 million to better conform to the
purposes of the Interlocks Act. Whereas the former rules prohibited
interlocks in an RMSA if one of the organizations has total assets of
$20 million or more, the final rules apply the RMSA-wide prohibition
only if both organizations have total assets of $20 million or more.
Interlocks within a community involving unaffiliated depository
organizations will continue to be prohibited, regardless of the size of
the organizations.
The agencies believe that this change is consistent with both the
language and the intent of the Interlocks Act. While the statute uses
the plural ``depository institutions'' in section 203(1) of the
Interlocks Act (12 U.S.C. 3202(1)), in context, the wording is
ambiguous and neither the statute nor its legislative history compels
the conclusion that the interlock must involve two institutions with
less than $20 million in assets before the less restrictive prohibition
applies.
The Interlocks Act seeks to prohibit interlocks that could enable
two institutions to engage in anticompetitive behavior. However, an
institution with total assets of less than $20 million is likely to
derive most of its business from the community in which it is located
and is unlikely to compete with institutions that do not have offices
in that community. Therefore, an interlock involving one institution
with assets under $20 million and another institution with assets of at
least $20 million not in the same community is not likely to lead to
the anticompetitive conduct that the Interlocks Act is designed to
prohibit.
The agencies believe, moreover, that the change will promote rather
than inhibit competition. Expanding the pool of managerial talent for
institutions with assets under $20 million could enhance the ability of
smaller institutions to compete by improving the management of these
institutions.
Every comment on this change either supported the change without
qualification or supported the change and asked the agencies go even
farther. A few commenters suggested that the agencies should raise the
asset thresholds discussed earlier and/or provide blanket exceptions
for institutions with total assets below certain levels. The agencies
note that the Interlocks Act, which establishes the thresholds at which
the various prohibitions apply, does not vest the agencies with
authority to change these levels or to exempt classes of organizations
from the statute's prohibitions. Accordingly, the agencies have not
adopted the changes proposed by these commenters.
Interlocking Relationships Expressly Permitted by Statute
The final rules state the exemptions found in 12 U.S.C. 3204 (1)-
(8).5 The final rules reorder the exemptions set forth in the
current regulations in order to conform the list of exemptions to the
list set forth in the Interlocks Act.
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\5\ The Interlocks Act contains an additional exemption for
savings associations and savings and loan holding companies that
have issued stock in connection with a qualified stock issuance
pursuant to section 10(q) of the Home Owners' Loan Act (12 U.S.C.
1467a(q)). See 12 U.S.C. 3204(9). The OTS therefore will continue to
list an additional exemption in its interlocks regulation that the
other agencies do not list. Another exemption provides for
interlocks as a result of an emergency acquisition of a savings
association authorized in accordance with section 13(k) of the
Federal Deposit Insurance Act (12 U.S.C. 1823(k)) if the FDIC has
given its approval to the interlock. The FDIC will continue to list
an additional exemption in its management interlocks regulation that
the other agencies do not list.
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Regulatory Standards Exemption
The final rules set forth the requirements that a depository
organization must satisfy in order to obtain a Regulatory Standards
exemption. The rules implement the requirement regarding certification
by allowing a depository organization's board of directors (or the
organizers of a depository organization that is being formed) to
certify to the appropriate agency that no other qualified candidate has
been found after undertaking reasonable efforts to locate qualified
candidates who are not prohibited from service under the Interlocks
Act. If read narrowly, the Interlocks Act could require a depository
organization to evaluate every person in a given locale that might be
qualified and interested. This would create a requirement that, in
practice, would be impossible to satisfy. Given that Congress would not
have included an exemption that would have no practical application,
the agencies believe that the ``reasonable efforts'' standard is
consistent with the legislative intent.
[[Page 40297]]
The final rules also set forth presumptions that the agencies will
apply when reviewing an application for a Regulatory Standards
exemption. First, each agency will presume that an interlock will not
have an anticompetitive effect if it involves institutions that, if
merged, would not trigger a challenge from the agencies on competitive
grounds. This presumption is unavailable, however, for interlocks
subject to the Major Assets prohibition.
Generally, the agencies will not object to a merger on competitive
grounds if the post-merger Herfindahl-Hirschman Index (HHI) for the
market is less than 1800 and the merger increases the HHI by 200 points
or less. This presumption will enable applicants to avoid the
unnecessary burden of submitting a competitive analysis in several
instances. The agencies have found this HHI benchmark to be a useful
guide to evaluating anticompetitive effects of interlocks.6
However, the agencies may decide that this presumption should not be
conclusive in appropriate circumstances, such as when approval of an
interlock request would lead to several institutions being linked by
overlapping management.
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\6\ See, e.g., the OCC's Bank Merger Competitive Analysis Screen
(OCC Advisory Letter 95-4, July 18, 1995); Department of Justice
Merger Guidelines (49 FR 26823, June 29, 1984) (applied by the
Board); FDIC Statement of Policy: Bank Merger Transactions (54 FR
39045, Sept. 22, 1989).
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Second, the agencies will presume that a person is critical to an
institution's safe and sound operations if the agencies also approved
that individual under section 914 of FIRREA and the institution in
question either was a newly chartered institution, failed to meet
minimum capital requirements, or otherwise was in a ``troubled
condition'' as defined in the reviewing agency's section 914 regulation
at the time the section 914 filing was approved.7
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\7\ This presumption also applies to individuals whose service
as a senior executive officer is approved by the OCC pursuant to the
standard conditions imposed on newly chartered national banks and to
individuals whose service as a management official is approved by
the FDIC as a condition of a grant of deposit insurance prior to the
opening of the depository institution.
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The final rules also address the duration of an interlock permitted
under the Regulatory Standards exemption. The statute does not require
that these interlocks terminate. In light of this open-ended grant of
authority, the agencies have not adopted a specific term for a
permitted exemption. Instead, an agency may require an institution to
terminate the interlock if the agency determines that the management
official in question either no longer is critical to the safe and sound
operations of the affected organization or that continued service will
produce an anticompetitive effect. The agencies will provide affected
organizations an opportunity to submit information before they make a
final determination to require termination of an interlock.
One commenter suggested that the agencies clarify that the 15-month
grace period that applies when an interlock must be terminated due to a
change in circumstances also applies in the case of a Regulatory
Standards exemption that must be terminated. The agencies agree with
the commenter that it is appropriate in most cases to grant a grace
period following the termination of a Regulatory Standards exemption in
order to minimize the disruption of the affected institution that
otherwise might be caused by the loss of a management official.
There may be circumstances, however, where immediate termination of
a regulatory standards exemption would be appropriate. For instance, if
an organization obtains an exemption on the basis of misleading
information, the organization's primary regulator will require the
organization to take appropriate steps to immediately remedy the
situation. The final rules thus provide for the possibility of a grace
period, with the caveat that the agencies may, under appropriate
circumstances, order the immediate termination of a Regulatory
Standards exemption.
Another commenter suggested that the agencies limit the term of a
Regulatory Standards exemption when the exemption is granted. This
commenter opined that depository organizations would benefit from the
greater certainty by avoiding questions concerning whether a director
must vacate his or her position on a board. The agencies believe that
the procedures in the final rules for terminating a Regulatory
Standards exemption will provide an affected organization with ample
certainty concerning the permissibility of continued service.
Grandfathered Interlocking Relationships--Removed
Section 338(a) of the CDRI Act authorizes the agencies to extend a
grandfathered interlock for an additional five years if the management
official in question satisfies the statutory criteria for obtaining an
extension.
The final rules remove the sections addressing the grandfather
exemption because they are unnecessary and redundant in light of the
statute. Individuals who wished to extend their exemption already have
applied for and received an exemption if they met the statutory
criteria.
Management Consignment Exemption
The final rules implement the Management Consignment exemption, set
forth in section 209(c) of the Interlocks Act (12 U.S.C. 3207(c)), by
restating the statutory criteria with three clarifications. First, the
final rules state that the agencies consider a ``newly chartered
institution'' to be an institution that has been chartered for less
than two years at the time it files an application for exemption. This
standard is consistent with certain other banking agency thresholds for
determining when an institution is considered newly chartered (see,
e.g., 12 CFR 5.51(d), 225.72(a)(1); 303.14(b)).
Second, the final rules clarify that the exemption available for
``minority- and women-owned institutions'' is available for an
institution that is owned either by minorities or women. In analyzing
the exemptions to the Interlocks Act that the Federal banking agencies
have approved, the House Conference Report to the CDRI Act (H.R. Conf.
Rep. No. 652, 103d Cong., 2d Sess. 181 (1994)) (Conference Report)
states that the types of institutions that have received exemptions
include those that are ``owned by women or minorities.'' These
exemptions ultimately were codified in the Interlocks Act. Accordingly,
the agencies have concluded that Congress intended the Management
Consignment exemption to assist institutions owned by women and/or by
minorities, but did not intend to require the institution to be owned
by both.
Third, the final rules permit an interlock if the interlock would
strengthen the management of either a newly chartered institution or an
institution that is in an unsafe or unsound condition. Section
209(c)(1)(C) of the Interlocks Act (12 U.S.C. 3207(c)(1)(C)) permits an
exemption if the interlock would ``strengthen the management of newly
chartered institutions that are in an unsafe or unsound condition.''
However, this provision contains what appears on its face to be an
error, given that an exemption limited to situations involving newly
chartered institutions that also are in an unsafe and unsound condition
would have no practical utility. The chartering agencies do not approve
an application for a bank or thrift charter unless the applicant
seeking a charter can demonstrate that the proposed new financial
institution will operate in a safe and sound manner for the foreseeable
future. While there may be an extraordinary instance where
[[Page 40298]]
a newly chartered institution immediately experiences unforeseen
problems so severe that they threaten the safety and soundness of that
institution, there is nothing in the legislative history to suggest
that Congress intended to limit the Management Consignment exemption to
such rare instances.
Moreover, the legislative history of the CDRI Act suggests that the
agencies are to apply the Management Consignment exemption in cases
involving either newly chartered institutions or institutions that are
in an unsafe or unsound condition. The Conference Report notes that the
agencies have used their exemptive authority to grant exemptions in
limited cases where institutions ``are particularly in need of
management guidance and expertise to operate in a safe and sound
manner.'' Id. The Conference Report goes on to state that ``Examples of
exceptions permissible under an agency management official consignment
program include improving the provision of credit to low- and moderate-
income areas, increasing the competitive position of minority- and
women-owned institutions, and strengthening the [sic] management of
newly chartered institutions or institutions that are in an unsafe or
unsound condition.'' Id. at 182 (emphasis added).
Finally, Congress used the exemptions in the agencies' current
rules as the model for the Management Consignment exemption. See id. at
181-182. These exemptions distinguish newly chartered institutions from
institutions that are in an unsafe or unsound condition. The reference
in the CDRI Act's legislative history to the current regulatory
exemptions suggests that Congress intended to codify these exemptions.
For these reasons, the agencies will permit Management Consignment
exemptions if the management official will strengthen either a newly
chartered institution or an institution that is in an unsafe or unsound
condition.
The final rules set forth two presumptions that the agencies will
apply in connection with an application for an exemption under the
Management Consignment exemption. First, the agencies will presume that
an individual is capable of strengthening the management of an
institution that has been chartered for less than two years if the
reviewing agency approved the individual to serve as a management
official of that institution pursuant to section 914 of FIRREA.8
Second, the agencies will presume that an individual is capable of
strengthening the management of an institution that is in an unsafe or
unsound condition if the reviewing agency approved the individual to
serve under section 914 as a management official of that institution at
a time when the institution was not in compliance with minimum capital
requirements or otherwise was in a ``troubled condition.''
---------------------------------------------------------------------------
\8\ This presumption also applies to an individual whose
service as a senior executive officer of a national bank is approved
pursuant to the standard conditions imposed by the OCC on newly
chartered national banks and to an individual whose service as a
management official is approved by the FDIC as a condition of a
grant of deposit insurance prior to the opening of the depository
institution.
---------------------------------------------------------------------------
The agencies believe that presumptions of suitability are less
valid when applied to the other Management Consignment exemptions
because there is no reason to conclude that a management official
approved under section 914 necessarily will improve the flow of credit
to low- and moderate-income areas or increase the competitive position
of minority- or women-owned institutions. Moreover, the final rules do
not contain a presumption regarding effects on competition, given that
this is not a factor to be considered by the agencies when reviewing an
application for a Management Consignment exemption.
The final rules set forth the limits on the duration of a
Management Consignment exemption. The Interlocks Act limits a
Management Consignment exemption to two years, with a possible
extension for up to an additional two years if the applicant satisfies
at least one of the criteria for obtaining a Management Consignment
exemption. The final rules implement this limitation by requiring
interested parties to submit an application for an extension at least
30 days before the expiration of the initial term of the exemption and
by clarifying that the presumptions that apply to initial applications
also apply to extension applications.
One commenter suggested that the agencies should be consistent in
how they address the duration of a Management Consignment exemption
with how the agencies address the duration of a Regulatory Standards
exemption, and permit a Management Consignment exemption to last until
the appropriate agency orders the interlock terminated. The statute is
clear, however, that a Management Consignment exemption may not last
more than one initial two-year term and one extension of up to an
additional two years in appropriate circumstances. Accordingly, the
agencies have not adopted the approach suggested by the commenter.
Change in Circumstances
The final rules provide a 15-month grace period for
nongrandfathered interlocks that become impermissible due to a change
in circumstances. This period may be shortened by the agencies under
appropriate circumstances.
Paperwork Reduction Act
OCC: The collection of information requirements contained in this
final rule have been reviewed and approved by the Office of Management
and Budget in accordance with the Paperwork Reduction Act of 1995 (44
U.S.C. 3507(d)) under control number 1557-0196. Comments on the
collections of information should be sent to the Office of Management
and Budget, Paperwork Reduction Project (1557-0196), Washington, DC
20503, with copies to the Legislative and Regulatory Activities
Division (1557-0196), Office of the Comptroller of the Currency, 250 E
Street, SW, Washington, DC 20219.
The collection of information requirements in this final rule are
found in 12 CFR 26.4(h)(1)(i), 26.5(a)(1), 26.5(a)(2), 26.6(a), and
26.6(c). This information is required by the Interlocks Act, and will
be used by the OCC to evaluate compliance with the requirements of the
Interlocks Act by national banks and District banks. The collections of
information are required to obtain a benefit.
Respondents are not required to respond to the foregoing collection
of information unless it displays a currently valid OMB control number.
The likely respondents are national banks and District banks.
Estimated average annual burden hours per respondent: 3 hours.
Estimated number of respondents: 100.
Start-up costs to respondents: None.
Board: In accordance with section 3506 of the Paperwork Reduction
Act of 1995 (44 U.S.C. Ch. 35; 5 CFR 1320 Appendix A.1), the Board
reviewed the final rule under the authority delegated to the Board by
the Office of Management and Budget. Comments on the collections of
information should be sent to the Office of Management and Budget,
Paperwork Reduction Project (7100-0046, 7100-0134, 7100-0171, 7100-
0266), Washington, DC 20503, with copies of such comments to be sent to
Mary M. McLaughlin, Federal Reserve Board Clearance Officer, Division
of Research and Statistics, Mail Stop 97, Board of Governors of the
[[Page 40299]]
Federal Reserve System, Washington, DC 20551.
The collection of information requirements in this final rule are
found in 12 CFR 212.4(h)(1)(i), 212.5(a)(1), 212.5(a)(2), 212.6(a), and
212.6(c). This information is required to evidence compliance with the
requirements of the Interlocks Act as amended by section 338 of the
CDRI Act. The respondents are state member banks and subsidiary
depository institutions of bank holding companies.
Currently, information on management official interlocks is
gathered as a part of the following applications: membership in the
Federal Reserve System (OMB No. 7100-0046); state member bank mergers
(OMB No. 7100-0266); changes in bank control (OMB No. 7100-0134); and
bank holding company acquisitions of depository institutions (OMB No.
7100-0171). The estimated portion of burden for each application that
is attributable to management interlocks averages 4 hours, and the
burden ranges from as much as 6 hours to as little as 0.5 hours. It is
estimated that 822 applications are filed annually, with an estimate of
3,288 hours of annual burden. Based on an hourly cost of $20, the
annual cost to the public is estimated to be $65,760. The Federal
Reserve believes that the final rule will have a minimal effect on
respondent burden.
The Federal Reserve may not conduct or sponsor, and an organization
is not required to respond to, these information collections unless
they display currently valid OMB control numbers.
No issues of confidentiality under the provisions of the Freedom
of Information Act normally arise for the applications.
FDIC: The collections of information contained in this final rule
have been reviewed and approved by the Office of Management and Budget
under control number 3064-0118 in accordance with the Paperwork
Reduction Act of 1995 (44 U.S.C. 3507(d)). Comments on the collections
of information should be sent to the Office of Management and Budget,
Paperwork Reduction Project (3604-0118), Washington, DC 20503, with
copies of such comments to be sent to Steven F. Hanft, Office of the
Executive Secretary, Room F-453, Federal Deposit Insurance Corporation,
550 17th Street, NW., Washington, DC 20429.
The collection of information requirements in this final rule are
found in 12 CFR 348.4(i)(1)(i), 348.5(a)(1), 348.5(a)(2), 348.6(a), and
348.6(c). This information is required by the Interlocks Act as amended
by section 338 of the CDRI Act, and will be used by the FDIC to
evaluate compliance with the requirements of the Interlocks Act by
insured nonmember banks. The likely respondents are insured nonmember
banks.
Estimated number of respondents: 6 applicants per year.
Estimated average annual burden per respondent: 4 hours.
Estimated annual frequency of recordkeeping: Not applicable (one-
time application).
Estimated total annual recordkeeping burden: 24 hours.
OTS: The collection of information requirements contained in this
rule have been reviewed and approved by the Office of Management and
Budget for review in accordance with the Paperwork Reduction Act of
1995 (44 U.S.C. 3507(d)). Comments on the collection of information
should be sent to the Office of Management and Budget, Paperwork
Reduction Project (1550-0051), Washington, DC 20503, with copies to the
Business Transactions Division (1550-0051), Office of Thrift
Supervision, 1700 G Street, NW., Washington, DC.
The collection of information requirements in this final rule are
found in 12 CFR 563f.4(h)(1)(i), 563f.5(a)(1), 563f.5(a)(2), 563f.6(a),
and 563f.6(c). This information is required by the Interlocks Act, and
will be used by the OTS to evaluate compliance with the requirements of
the Interlocks Act by savings associations. The collections of
information are required to obtain a benefit.
Respondents are not required to respond to the foregoing collection
of information unless it displays a currently valid OMB control number.
The likely respondents are savings associations.
Estimated average annual burden hours per respondent: 4 hours.
Estimated number of respondents: 8.
Start-up costs to respondents: None.
Regulatory Flexibility Act
Pursuant to section 605(b) of the Regulatory Flexibility Act (RFA)
(5 U.S.C. 605(b)), the regulatory flexibility analysis otherwise
required under section 603 of the RFA (5 U.S.C. 603) is not required if
the head of the agency certifies that the rule will not have a
significant economic impact on a substantial number of small entities
and the agency publishes such certification and a succinct statement
explaining the reasons for such certification in the Federal Register
along with its final rule.
Pursuant to section 605(b) of the RFA, the agencies hereby certify
that this rule will not have a significant economic impact on a
substantial number of small entities. The agencies expect that this
rule will not (1) have significant secondary or incidental effects on a
substantial number of small entities or (2) create any additional
burden on small entities. The changes to the exemptions are required by
the Interlocks Act. The agencies have added presumptions that will
streamline and simplify the application procedures for obtaining an
exemption from the Interlocks Act prohibitions, and have defined key
terms used in the provisions implementing these exemptions in a way
that is intended to eliminate any unnecessary burden. As noted in the
preamble discussion of the changes made by the final rule, the agencies
have made substantive changes that will permit more flexibility to
institutions with total assets of less than $20 million, clarified the
circumstances under which someone will be deemed to be a
``representative or nominee,'' and amended the definition of ``senior
management official'' so as to provide greater clarity and to conform
this definition with definitions of similar terms used in other
regulations.
The impact of these changes will be to minimize, to the extent
possible, the costs of complying with this final rule.
Executive Order 12866
OCC and OTS: The OCC and OTS have determined that this rule is not
a significant regulatory action under Executive Order 12866.
Unfunded Mandates Act of 1995
OCC and OTS: Section 202 of the Unfunded Mandates Act of 1995
(Unfunded Mandates Act) requires that an agency prepare a budgetary
impact statement before promulgating a rule likely to result in a
Federal mandate that may result in the annual expenditure of $100
million or more in any one year by State, local, and tribal
governments, in the aggregate, or by the private sector. If a budgetary
impact statement is required, section 205 of the Unfunded Mandates Act
requires an agency to identify and consider a reasonable number of
alternatives before promulgating the rule.
The OCC and OTS have determined that this final rule will not
result in expenditures by State, local, and tribal governments, or by
the private sector, of more than $100 million in any one year.
Accordingly, neither the OCC nor the OTS has prepared a budgetary
impact statement or specifically addressed the regulatory alternatives
considered.
[[Page 40300]]
List of Subjects
12 CFR Part 26
Antitrust, Banks, banking, Holding companies, Management official
interlocks, National banks.
12 CFR Part 212
Antitrust, Banks, banking, Holding companies, Management official
interlocks.
12 CFR Part 348
Antitrust, Banks, banking, Holding companies.
12 CFR Part 563f
Antitrust, Holding companies, Management official interlocks,
Savings associations.
Office of the Comptroller of the Currency
12 CFR Chapter I
Authority and Issuance
For the reasons set out in the joint preamble, the OCC revises part
26 of chapter I of title 12 of the Code of Federal Regulations to read
as follows:
PART 26--MANAGEMENT OFFICIAL INTERLOCKS
Sec.
26.1 Authority, purpose, and scope.
26.2 Definitions.
26.3 Prohibitions.
26.4 Interlocking relationships permitted by statute.
26.5 Regulatory Standards exemption.
26.6 Management Consignment exemption.
26.7 Change in circumstances.
26.8 Enforcement.
Authority: 12 U.S.C. 93a and 3201-3208.
Sec. 26.1 Authority, purpose, and scope.
(a) Authority. This part is issued under the provisions of the
Depository Institution Management Interlocks Act (Interlocks Act) (12
U.S.C. 3201 et seq.), as amended, and the OCC's general rulemaking
authority in 12 U.S.C. 93a.
(b) Purpose. The purpose of the Interlocks Act and this part is to
foster competition by generally prohibiting a management official from
serving two nonaffiliated depository organizations in situations where
the management interlock likely would have an anticompetitive effect.
(c) Scope. This part applies to management officials of national
banks, District banks, and affiliates of either.
Sec. 26.2 Definitions.
For purposes of this part, the following definitions apply:
(a) Affiliate. (1) The term affiliate has the meaning given in
section 202 of the Interlocks Act (12 U.S.C. 3201). For purposes of
that section 202, shares held by an individual include shares held by
members of his or her immediate family. ``Immediate family'' means
spouse, mother, father, child, grandchild, sister, brother, or any of
their spouses, whether or not any of their shares are held in trust.
(2) For purposes of section 202(3)(B) of the Interlocks Act (12
U.S.C. 3201(3)(B)), an affiliate relationship involving a national bank
based on common ownership does not exist if the OCC determines, after
giving the affected persons the opportunity to respond, that the
asserted affiliation was established in order to avoid the prohibitions
of the Interlocks Act and does not represent a true commonality of
interest between the depository organizations. In making this
determination, the OCC considers, among other things, whether a person,
including members of his or her immediate family, whose shares are
necessary to constitute the group owns a nominal percentage of the
shares of one of the organizations and the percentage is substantially
disproportionate to that person's ownership of shares in the other
organization.
(b) Anticompetitive effect means a monopoly or substantial
lessening of competition.
(c) Area median income means:
(1) The median family income for the metropolitan statistical area
(MSA), if a depository organization is located in an MSA; or
(2) The statewide nonmetropolitan median family income, if a
depository organization is located outside an MSA.
(d) Community means a city, town, or village, and contiguous or
adjacent cities, towns, or villages.
(e) Contiguous or adjacent cities, towns, or villages means cities,
towns, or villages whose borders touch each other or whose borders are
within 10 road miles of each other at their closest points. The
property line of an office located in an unincorporated city, town, or
village is the boundary line of that city, town, or village for the
purpose of this definition.
(f) Critical means important to restoring or maintaining a
depository organization's safe and sound operations.
(g) Depository holding company means a bank holding company or a
savings and loan holding company (as more fully defined in section 202
of the Interlocks Act (12 U.S.C. 3201)) having its principal office
located in the United States.
(h) Depository institution means a commercial bank (including a
private bank), a savings bank, a trust company, a savings and loan
association, a building and loan association, a homestead association,
a cooperative bank, an industrial bank, or a credit union, chartered
under the laws of the United States and having a principal office
located in the United States. Additionally, a United States office,
including a branch or agency, of a foreign commercial bank is a
depository institution.
(i) Depository institution affiliate means a depository institution
that is an affiliate of a depository organization.
(j) Depository organization means a depository institution or a
depository holding company.
(k) District bank means any State bank operating under the Code of
Law of the District of Columbia.
(l) Low- and moderate-income areas means census tracts (or, if an
area is not in a census tract, block numbering areas delineated by the
United States Bureau of the Census) where the median family income is
less than 100 percent of the area median income.
(m) Management official. (1) The term management official means:
(i) A director;
(ii) An advisory or honorary director of a depository institution
with total assets of $100 million or more;
(iii) A senior executive officer as that term is defined in 12 CFR
5.51(c)(3);
(iv) A branch manager;
(v) A trustee of a depository organization under the control of
trustees; and
(vi) Any person who has a representative or nominee serving in any
of the capacities in this paragaph (m)(1).
(2) The term management official does not include:
(i) A person whose management functions relate exclusively to the
business of retail merchandising or manufacturing;
(ii) A person whose management functions relate principally to the
business outside the United States of a foreign commercial bank; or
(iii) A person described in the provisos of section 202(4) of the
Interlocks Act (12 U.S.C. 3201(4)) (referring to an officer of a State-
chartered savings bank, cooperative bank, or trust company that neither
makes real estate mortgage loans nor accepts savings).
(n) Office means a principal or branch office of a depository
institution located in the United States. Office does not include a
representative office of a foreign commercial bank, an electronic
terminal, or a loan production office.
(o) Person means a natural person, corporation, or other business
entity.
[[Page 40301]]
(p) Relevant metropolitan statistical area (RMSA) means an MSA, a
primary MSA, or a consolidated MSA that is not comprised of designated
primary MSAs to the extent that these terms are defined and applied by
the Office of Management and Budget.
(q) Representative or nominee means a natural person who serves as
a management official and has an obligation to act on behalf of another
person with respect to management responsibilities. The OCC will find
that a person has an obligation to act on behalf of another person only
if the first person has an agreement, express or implied, to act on
behalf of the second person with respect to management
responsibilities. The OCC will determine, after giving the affected
persons an opportunity to respond, whether a person is a representative
or nominee.
(r) Total assets. (1) The term total assets means assets measured
on a consolidated basis and reported in the most recent fiscal year-end
Consolidated Report of Condition and Income.
(2) The term total assets does not include:
(i) Assets of a diversified savings and loan holding company as
defined by section 10(a)(1)(F) of the Home Owners' Loan Act (12 U.S.C.
1467a(a)(1)(F)) other than the assets of its depository institution
affiliate;
(ii) Assets of a bank holding company that is exempt from the
prohibitions of section 4 of the Bank Holding Company Act of 1956
pursuant to an order issued under section 4(d) of that Act (12 U.S.C.
1843(d)) other than the assets of its depository institution affiliate;
or
(iii) Assets of offices of a foreign commercial bank other than the
assets of its United States branch or agency.
(s) United States means the United States of America, any State or
territory of the United States of America, the District of Columbia,
Puerto Rico, Guam, American Samoa, and the Virgin Islands.
Sec. 26.3 Prohibitions.
(a) Community. A management official of a depository organization
may not serve at the same time as a management official of an
unaffiliated depository organization if the depository organizations in
question (or a depository institution affiliate thereof) have offices
in the same community.
(b) RMSA. A management official of a depository organization may
not serve at the same time as a management official of an unaffiliated
depository organization if the depository organizations in question (or
a depository institution affiliate thereof) have offices in the same
RMSA and each depository organization has total assets of $20 million
or more.
(c) Major assets. A management official of a depository
organization with total assets exceeding $1 billion (or any affiliate
thereof) may not serve at the same time as a management official of an
unaffiliated depository organization with total assets exceeding $500
million (or any affiliate thereof), regardless of the location of the
two depository organizations.
Sec. 26.4 Interlocking relationships permitted by statute.
The prohibitions of Sec. 26.3 do not apply in the case of any one
or more of the following organizations or to a subsidiary thereof:
(a) A depository organization that has been placed formally in
liquidation, or which is in the hands of a receiver, conservator, or
other official exercising a similar function;
(b) A corporation operating under section 25 or section 25A of the
Federal Reserve Act (12 U.S.C. 601 et seq. and 12 U.S.C. 611 et seq.,
respectively) (Edge Corporations and Agreement Corporations);
(c) A credit union being served by a management official of another
credit union;
(d) A depository organization that does not do business within the
United States except as an incident to its activities outside the
United States;
(e) A State-chartered savings and loan guaranty corporation;
(f) A Federal Home Loan Bank or any other bank organized solely to
serve depository institutions (a bankers' bank) or solely for the
purpose of providing securities clearing services and services related
thereto for depository institutions and securities companies;
(g) A depository organization that is closed or is in danger of
closing as determined by the appropriate Federal depository
institutions regulatory agency and is acquired by another depository
organization. This exemption lasts for five years, beginning on the
date the depository organization is acquired; and
(h)(1) A diversified savings and loan holding company (as defined
in section 10(a)(1)(F) of the Home Owners' Loan Act (12 U.S.C.
1467a(a)(1)(F)) with respect to the service of a director of such
company who also is a director of an unaffiliated depository
organization if:
(i) Both the diversified savings and loan holding company and the
unaffiliated depository organization notify their appropriate Federal
depository institutions regulatory agency at least 60 days before the
dual service is proposed to begin; and
(ii) The appropriate regulatory agency does not disapprove the dual
service before the end of the 60-day period.
(2) The OCC may disapprove a notice of proposed service if it finds
that:
(i) The service cannot be structured or limited so as to preclude
an anticompetitive effect in financial services in any part of the
United States;
(ii) The service would lead to substantial conflicts of interest or
unsafe or unsound practices; or
(iii) The notificant failed to furnish all the information required
by the OCC.
(3) The OCC may require that any interlock permitted under this
paragraph (h) be terminated if a change in circumstances occurs with
respect to one of the interlocked depository organizations that would
have provided a basis for disapproval of the interlock during the
notice period.
Sec. 26.5 Regulatory Standards exemption.
(a) Criteria. The OCC may permit an interlock that otherwise would
be prohibited by the Interlocks Act and Sec. 26.3 if:
(1) The board of directors of the depository organization (or the
organizers of a depository organization being formed) that seeks the
exemption provides a resolution to the OCC certifying that the
organization, after the exercise of reasonable efforts, is unable to
locate any other candidate from the community or RMSA, as appropriate,
who:
(i) Possesses the level of expertise required by the depository
organization and who is not prohibited from service by the Interlocks
Act; and
(ii) Is willing to serve as a management official; and
(2) The OCC, after reviewing an application submitted by the
depository organization seeking the exemption, determines that:
(i) The management official is critical to the safe and sound
operations of the affected depository organization; and
(ii) Service by the management official will not produce an
anticompetitive effect with respect to the depository organization.
(b) Presumptions. The OCC applies the following presumptions when
reviewing any application for a Regulatory Standards exemption:
(1) An interlock will not have an anticompetitive effect if it
involves depository organizations that, if merged, would not cause the
post-merger Herfindahl-Hirschman Index (HHI) to exceed 1800 and would
not cause the HHI to increase by more than 200 points. This presumption
does not
[[Page 40302]]
apply to depository organizations subject to the Major Assets
prohibition of Sec. 26.3(c).
(2) A proposed management official is critical to the safe and
sound operations of a depository institution if:
(i) That official is approved by the OCC to serve as a director or
senior executive officer of that institution pursuant to 12 CFR 5.51 or
pursuant to conditions imposed on a newly chartered national bank; and
(ii) The institution had operated for less than two years, was not
in compliance with minimum capital requirements, or otherwise was in a
``troubled condition'' as defined in 12 CFR 5.51 at the time the
service under that section was approved.
(c) Duration of interlock. An interlock permitted under this
section may continue until the OCC notifies the affected depository
organizations otherwise. The OCC may require a national bank to
terminate any interlock permitted under this section if the OCC
concludes, after giving the affected persons the opportunity to
respond, that the determinations under paragraph (a)(2) of this section
no longer may be made. A management official may continue serving the
depository organization involved in the interlock for a period of 15
months following the date of the order to terminate the interlock. The
OCC may shorten this period under appropriate circumstances.
Sec. 26.6 Management Consignment exemption.
(a) Criteria. The OCC may permit an interlock that otherwise would
be prohibited by the Interlocks Act and Sec. 26.3 if the OCC, after
reviewing an application submitted by the depository organization
seeking an exemption, determines that the interlock would:
(1) Improve the provision of credit to low- and moderate-income
areas;
(2) Increase the competitive position of a minority- or women-owned
depository organization;
(3) Strengthen the management of a depository institution that has
been chartered for less than two years at the time an application is
filed under this part; or
(4) Strengthen the management of a depository institution that is
in an unsafe or unsound condition as determined by the OCC on a case-
by-case basis.
(b) Presumptions. The OCC applies the following presumptions when
reviewing any application for a Management Consignment exemption:
(1) A proposed management official is capable of strengthening the
management of a depository institution described in paragraph (a)(3) of
this section if that official is approved by the OCC to serve as a
director or senior executive officer of that institution pursuant to 12
CFR 5.51 or pursuant to conditions imposed on a newly chartered
national bank and the institution had operated for less than two years
at the time the service under 12 CFR 5.51 was approved; and
(2) A proposed management official is capable of strengthening the
management of a depository institution described in paragraph (a)(4) of
this section if that official is approved by the OCC to serve as a
director or senior executive officer of that institution pursuant to 12
CFR 5.51 and the institution was not in compliance with minimum capital
requirements or otherwise was in a ``troubled condition'' as defined
under 12 CFR 5.51 at the time service under that section was approved.
(c) Duration of interlock. An interlock granted under this section
may continue for a period of two years from the date of approval. The
OCC may extend this period for one additional two-year period if the
depository organization applies for an extension at least 30 days
before the current exemption expires and satisfies one of the criteria
specified in paragraph (a) of this section. The provisions set forth in
paragraph (b) of this section also apply to applications for
extensions.
Sec. 26.7 Change in circumstances.
(a) Termination. A management official shall terminate his or her
service or apply for an exemption to the Interlocks Act if a change in
circumstances causes the service to become prohibited under that Act. A
change in circumstances may include, but is not limited to, an increase
in asset size of an organization, a change in the delineation of the
RMSA or community, the establishment of an office, an acquisition, a
merger, a consolidation, or any reorganization of the ownership
structure of a depository organization that causes a previously
permissible interlock to become prohibited.
(b) Transition period. A management official described in paragraph
(a) of this section may continue to serve the depository organization
involved in the interlock for 15 months following the date of the
change in circumstances. The OCC may shorten this period under
appropriate circumstances.
Sec. 26.8 Enforcement.
Except as provided in this section, the OCC administers and
enforces the Interlocks Act with respect to national banks, District
banks, and affiliates of either, and may refer any case of a prohibited
interlocking relationship involving these entities to the Attorney
General of the United States to enforce compliance with the Interlocks
Act and this part. If an affiliate of a national bank or a District
bank is subject to the primary regulation of another Federal depository
organization supervisory agency, then the OCC does not administer and
enforce the Interlocks Act with respect to that affiliate.
Dated: July 22, 1996.
Eugene A. Ludwig,
Comptroller of the Currency.
Federal Reserve System
12 CFR Chapter II
Authority and Issuance
For the reasons set forth in the joint preamble, the Board revises
part 212 of chapter II of title 12 of the Code of Federal Regulations
to read as follows:
PART 212--MANAGEMENT OFFICIAL INTERLOCKS
Sec.
212.1 Authority, purpose, and scope.
212.2 Definitions.
212.3 Prohibitions.
212.4 Interlocking relationships permitted by statute.
212.5 Regulatory Standards exemption.
212.6 Management Consignment exemption.
212.7 Change in circumstances.
212.8 Enforcement.
212.9 Effect of Interlocks Act on Clayton Act.
Authority: 12 U.S.C. 3201-3208; 15 U.S.C. 19.
Sec. 212.1 Authority, purpose, and scope.
(a) Authority. This part is issued under the provisions of the
Depository Institution Management Interlocks Act (Interlocks Act) (12
U.S.C. 3201 et seq.), as amended.
(b) Purpose. The purpose of the Interlocks Act and this part is to
foster competition by generally prohibiting a management official from
serving two nonaffiliated depository organizations in situations where
the management interlock likely would have an anticompetitive effect.
(c) Scope. This part applies to management officials of state
member banks, bank holding companies, and their affiliates.
Sec. 212.2 Definitions.
For purposes of this part, the following definitions apply:
(a) Affiliate. (1) The term affiliate has the meaning given in
section 202 of the Interlocks Act (12 U.S.C. 3201). For purposes of
that section 202, shares held
[[Page 40303]]
by an individual include shares held by members of his or her immediate
family. ``Immediate family'' means spouse, mother, father, child,
grandchild, sister, brother, or any of their spouses, whether or not
any of their shares are held in trust.
(2) For purposes of section 202(3)(B) of the Interlocks Act (12
U.S.C. 3201(3)(B)), an affiliate relationship based on common ownership
does not exist if the Board determines, after giving the affected
persons the opportunity to respond, that the asserted affiliation was
established in order to avoid the prohibitions of the Interlocks Act
and does not represent a true commonality of interest between the
depository organizations. In making this determination, the Board
considers, among other things, whether a person, including members of
his or her immediate family, whose shares are necessary to constitute
the group owns a nominal percentage of the shares of one of the
organizations and the percentage is substantially disproportionate to
that person's ownership of shares in the other organization.
(b) Anticompetitive effect means a monopoly or substantial
lessening of competition.
(c) Area median income means:
(1) The median family income for the metropolitan statistical area
(MSA), if a depository organization is located in an MSA; or
(2) The statewide nonmetropolitan median family income, if a
depository organization is located outside an MSA.
(d) Community means a city, town, or village, and contiguous and
adjacent cities, towns, or villages.
(e) Contiguous or adjacent cities, towns, or villages means cities,
towns, or villages whose borders touch each other or whose borders are
within 10 road miles of each other at their closest points. The
property line of an office located in an unincorporated city, town, or
village is the boundary line of that city, town, or village for the
purpose of this definition.
(f) Critical, as used in Sec. 212.5, means important to restoring
or maintaining a depository organization's safe and sound operations.
(g) Depository holding company means a bank holding company or a
savings and loan holding company (as more fully defined in section 202
of the Interlocks Act (12 U.S.C. 3201)) having its principal office
located in the United States.
(h) Depository institution means a commercial bank (including a
private bank), a savings bank, a trust company, a savings and loan
association, a building and loan association, a homestead association,
a cooperative bank, an industrial bank, or a credit union, chartered
under the laws of the United States and having a principal office
located in the United States. Additionally, a United States office,
including a branch or agency, of a foreign commercial bank is a
depository institution.
(i) Depository institution affiliate means a depository institution
that is an affiliate of a depository organization.
(j) Depository organization means a depository institution or a
depository holding company.
(k) Low- and moderate-income areas means census tracts (or, if an
area is not in a census tract, block numbering areas delineated by the
United States Bureau of the Census) where the median family income is
less than 100 percent of the area median income.
(l) Management official. (1) The term management official means:
(i) A director;
(ii) An advisory or honorary director of a depository institution
with total assets of $100 million or more;
(iii) A senior executive officer as that term is defined in 12 CFR
225.71(a);
(iv) A branch manager;
(v) A trustee of a depository organization under the control of
trustees; and
(vi) Any person who has a representative or nominee, as defined in
paragraph (p) of this section, serving in any of the capacities in this
paragraph (l)(1).
(2) The term management official does not include:
(i) A person whose management functions relate exclusively to the
business of retail merchandising or manufacturing;
(ii) A person whose management functions relate principally to a
foreign commercial bank's business outside the United States; or
(iii) A person described in the provisos of section 202(4) of the
Interlocks Act (referring to an officer of a State-chartered savings
bank, cooperative bank, or trust company that neither makes real estate
mortgage loans nor accepts savings).
(m) Office means a principal or branch office of a depository
institution located in the United States. Office does not include a
representative office of a foreign commercial bank, an electronic
terminal, a loan production office, or any office of a depository
holding company.
(n) Person means a natural person, corporation, or other business
entity.
(o) Relevant metropolitan statistical area (RMSA) means an MSA, a
primary MSA, or a consolidated MSA that is not comprised of designated
Primary MSAs to the extent that these terms are defined and applied by
the Office of Management and Budget.
(p) Representative or nominee means a natural person who serves as
a management official and has an obligation to act on behalf of another
person with respect to management responsibilities. The Board will find
that a person has an obligation to act on behalf of another person only
if the first person has an agreement, express or implied, to act on
behalf of the second person with respect to management
responsibilities. The Board will determine, after giving the affected
persons an opportunity to respond, whether a person is a representative
or nominee.
(q) Total assets. (1) The term total assets means assets measured
on a consolidated basis and reported in the most recent fiscal year-end
Consolidated Report of Condition and Income.
(2) The term total assets does not include:
(i) Assets of a diversified savings and loan holding company as
defined by section 10(a)(1)(F) of the Home Owners' Loan Act (12 U.S.C.
1467a(a)(1)(F)) other than the assets of its depository institution
affiliate;
(ii) Assets of a bank holding company that is exempt from the
prohibitions of section 4 of the Bank Holding Company Act of 1956
pursuant to an order issued under section 4(d) of that Act (12 U.S.C.
1843(d)) other than the assets of its depository institution affiliate;
or
(iii) Assets of offices of a foreign commercial bank other than the
assets of its United States branch or agency.
(r) United States means the United States of America, any State or
territory of the United States of America, the District of Columbia,
Puerto Rico, Guam, American Samoa, and the Virgin Islands.
Sec. 212.3 Prohibitions.
(a) Community. A management official of a depository organization
may not serve at the same time as a management official of an
unaffiliated depository organization if the depository organizations in
question (or a depository institution affiliate thereof) have offices
in the same community.
(b) RMSA. A management official of a depository organization may
not serve at the same time as a management official of an unaffiliated
depository organization if the depository organizations in question (or
a depository institution affiliate thereof) have offices in the same
RMSA and each
[[Page 40304]]
depository organization has total assets of $20 million or more.
(c) Major assets. A management official of a depository
organization with total assets exceeding $1 billion (or any affiliate
thereof) may not serve at the same time as a management official of an
unaffiliated depository organization with total assets exceeding $500
million (or any affiliate thereof), regardless of the location of the
two depository organizations.
Sec. 212.4 Interlocking relationships permitted by statute.
The prohibitions of Sec. 212.3 do not apply in the case of any one
or more of the following organizations or to a subsidiary thereof:
(a) A depository organization that has been placed formally in
liquidation, or which is in the hands of a receiver, conservator, or
other official exercising a similar function;
(b) A corporation operating under section 25 or section 25A of the
Federal Reserve Act (12 U.S.C. 601 et seq. and 12 U.S.C. 611 et seq.,
respectively) (Edge Corporations and Agreement Corporations);
(c) A credit union being served by a management official of another
credit union;
(d) A depository organization that does not do business within the
United States except as an incident to its activities outside the
United States;
(e) A State-chartered savings and loan guaranty corporation;
(f) A Federal Home Loan Bank or any other bank organized solely to
serve depository institutions (a bankers' bank) or solely for the
purpose of providing securities clearing services and services related
thereto for depository institutions and securities companies;
(g) A depository organization that is closed or is in danger of
closing as determined by the appropriate Federal depository
institution's regulatory agency and is acquired by another depository
organization. This exemption lasts for five years, beginning on the
date the depository organization is acquired; and
(h)(1) A diversified savings and loan holding company (as defined
in section 10(a)(1)(F) of the Home Owners' Loan Act (12 U.S.C.
1467a(a)(1)(F)) with respect to the service of a director of such
company who also is a director of an unaffiliated depository
organization if:
(i) Both the diversified savings and loan holding company and the
unaffiliated depository organization notify their appropriate Federal
depository institutions regulatory agency at least 60 days before the
dual service is proposed to begin; and
(ii) The appropriate regulatory agency does not disapprove the dual
service before the end of the 60-day period.
(2) The Board may disapprove a notice of proposed service if it
finds that:
(i) The service cannot be structured or limited so as to preclude
an anticompetitive effect in financial services in any part of the
United States;
(ii) The service would lead to substantial conflicts of interest or
unsafe or unsound practices; or
(iii) The notificant failed to furnish all the information required
by the Board.
(3) The Board may require that any interlock permitted under this
paragraph (h) be terminated if a change in circumstances occurs with
respect to one of the interlocked depository organizations that would
have provided a basis for disapproval of the interlock during the
notice period.
Sec. 212.5 Regulatory Standards exemption.
(a) Criteria. The Board may permit an interlock that otherwise
would be prohibited by the Interlocks Act and Sec. 212.3 if:
(1) The board of directors of the depository organization (or the
organizers of a depository organization being formed) that seeks the
exemption provides a resolution to the Board certifying that the
organization, after the exercise of reasonable efforts, is unable to
locate any other candidate from the community or RMSA, as appropriate,
who:
(i) Possesses the level of expertise required by the depository
organization and who is not prohibited from service by the Interlocks
Act; and
(ii) Is willing to serve as a management official; and
(2) The Board, after reviewing an application submitted by the
depository organization seeking the exemption, determines that:
(i) The management official is critical to the safe and sound
operations of the affected depository organization; and
(ii) Service by the management official will not produce an
anticompetitive effect with respect to the depository organization.
(b) Presumptions. The Board applies the following presumptions when
reviewing any application for a Regulatory Standards exemption:
(1) An interlock will not have an anticompetitive effect if it
involves depository organizations that, if merged, would not cause the
post-merger Herfindahl-Hirschman Index (HHI) to exceed 1800 and would
not cause the HHI to increase by more than 200 points. This presumption
does not apply to depository organizations subject to the Major Assets
prohibition of Sec. 212.3(c).
(2) A proposed management official is critical to the safe and
sound operations of a depository institution if:
(i) That official is approved by the Board to serve as a director
or senior executive officer of that institution pursuant to 12 CFR
225.71; and
(ii) The institution had operated for less than two years, was not
in compliance with minimum capital requirements, or otherwise was in a
``troubled condition'' as defined in 12 CFR 225.71 at the time the
service under that section was approved.
(c) Duration of interlock. An interlock permitted under this
section may continue until the Board notifies the affected depository
organizations otherwise. The Board may require termination of any
interlock permitted under this section if the Board concludes, after
giving the affected persons the opportunity to respond, that the
determinations under paragraph (a)(2) of this section no longer may be
made. A management official may continue serving the depository
organization involved in the interlock for a period of 15 months
following the date of the order to terminate the interlock. The Board
may shorten this period under appropriate circumstances.
Sec. 212.6 Management Consignment exemption.
(a) Criteria. The Board may permit an interlock that otherwise
would be prohibited by the Interlocks Act and Sec. 212.3 if the Board,
after reviewing an application submitted by the depository organization
seeking an exemption, determines that the interlock would:
(1) Improve the provision of credit to low- and moderate-income
areas;
(2) Increase the competitive position of a minority- or women-owned
depository organization;
(3) Strengthen the management of a depository institution that has
been chartered for less than two years at the time an application is
filed under this part; or
(4) Strengthen the management of a depository institution that is
in an unsafe or unsound condition as determined by the Board on a case-
by-case basis.
(b) Presumptions. The Board applies the following presumptions in
reviewing any application for a Management Consignment exemption:
(1) A proposed management official is capable of strengthening the
management of a depository institution
[[Page 40305]]
described in paragraph (a)(3) of this section if that official is
approved by the Board to serve as a director or senior executive
officer of that institution pursuant to 12 CFR 225.71 and the
institution had operated for less than two years at the time the
service was approved; and
(2) A proposed management official is capable of strengthening the
management of a depository institution described in paragraph (a)(4) of
this section if the official is approved by the Board to serve as a
director or senior executive officer of the institution pursuant to 12
CFR 225.71 and the institution was not in compliance with minimum
capital requirements or otherwise was in a ``troubled condition'' as
defined under 12 CFR 225.71 at the time service was approved.
(c) Duration of interlock. An interlock granted under this section
may continue for a period of two years from the date of approval. The
Board may extend this period for one additional two-year period if the
depository organization applies for an extension at least 30 days
before the current exemption expires and satisfies one of the criteria
specified in paragraph (a) of this section. The provisions set forth in
paragraph (b) of this section also apply to applications for
extensions.
Sec. 212.7 Change in circumstances.
(a) Termination. A management official shall terminate his or her
service or apply for an exemption to the Interlocks Act if a change in
circumstances causes the service to become prohibited under that Act. A
change in circumstances may include, but is not limited to, an increase
in asset size of an organization, a change in the delineation of the
RMSA or community, the establishment of an office, an acquisition, a
merger, a consolidation, or any reorganization of the ownership
structure of a depository organization that causes a previously
permissible interlock to become prohibited.
(b) Transition period. A management official described in paragraph
(a) of this section may continue to serve the state member bank or bank
holding company involved in the interlock for 15 months following the
date of the change in circumstances. The Board may shorten this period
under appropriate circumstances.
Sec. 212.8 Enforcement.
Except as provided in this section, the Board administers and
enforces the Interlocks Act with respect to state member banks, bank
holding companies, and affiliates of either, and may refer any case of
a prohibited interlocking relationship involving these entities to the
Attorney General of the United States to enforce compliance with the
Interlocks Act and this part. If an affiliate of a state member bank or
a bank holding company is subject to the primary regulation of another
Federal depository organization supervisory agency, then the Board does
not administer and enforce the Interlocks Act with respect to that
affiliate.
Sec. 212.9 Effect of Interlocks Act on Clayton Act.
The Board regards the provisions of the first three paragraphs of
section 8 of the Clayton Act (15 U.S.C. 19) to have been supplanted by
the revised and more comprehensive prohibitions on management official
interlocks between depository organizations in the Interlocks Act.
Dated: July 10, 1996.
William W. Wiles,
Secretary of the Board.
Federal Deposit Insurance Corporation
12 CFR Chapter III
Authority and Issuance
For the reasons set forth in the joint preamble, pursuant to its
authority under section 209 of the Depository Institution Management
Interlocks Act (12 U.S.C. 3207), the Board of Directors of the FDIC
revises part 348 of chapter III of title 12 of the Code of Federal
Regulations to read as follows:
PART 348--MANAGEMENT OFFICIAL INTERLOCKS
Sec.
348.1 Authority, purpose, and scope.
348.2 Definitions.
348.3 Prohibitions.
348.4 Interlocking relationships permitted by statute.
348.5 Regulatory Standards exemption.
348.6 Management Consignment exemption.
348.7 Change in circumstances.
348.8 Enforcement.
Authority: 12 U.S.C. 3207, 12 U.S.C. 1823(k).
Sec. 348.1 Authority, purpose, and scope.
(a) Authority. This part is issued under the provisions of the
Depository Institution Management Interlocks Act (Interlocks Act) (12
U.S.C. 3201 et seq.), as amended.
(b) Purpose. The purpose of the Interlocks Act and this part is to
foster competition by generally prohibiting a management official from
serving two nonaffiliated depository organizations in situations where
the management interlock likely would have an anticompetitive effect.
(c) Scope. This part applies to management officials of insured
nonmember banks and their affiliates.
Sec. 348.2 Definitions.
For purposes of this part, the following definitions apply:
(a) Affiliate. (1) The term affiliate has the meaning given in
section 202 of the Interlocks Act (12 U.S.C. 3201). For purposes of
section 202, shares held by an individual include shares held by
members of his or her immediate family. ``Immediate family'' means
spouse, mother, father, child, grandchild, sister, brother or any of
their spouses, whether or not any of their shares are held in trust.
(2) For purposes of section 202(3)(B) of the Interlocks Act (12
U.S.C. 3201(3)(B)), an affiliate relationship involving an insured
nonmember bank based on common ownership does not exist if the FDIC
determines, after giving the affected persons the opportunity to
respond, that the asserted affiliation was established in order to
avoid the prohibitions of the Interlocks Act and does not represent a
true commonality of interest between the depository organizations. In
making this determination, the FDIC considers, among other things,
whether a person, including members of his or her immediate family
whose shares are necessary to constitute the group, owns a nominal
percentage of the shares of one of the organizations and the percentage
is substantially disproportionate to that person's ownership of shares
in the other organization.
(b) Anticompetitive effect means a monopoly or substantial
lessening of competition.
(c) Area median income means:
(1) The median family income for the metropolitan statistical area
(MSA), if a depository organization is located in an MSA; or
(2) The statewide nonmetropolitan median family income, if a
depository organization is located outside an MSA.
(d) Community means a city, town, or village, and contiguous or
adjacent cities, towns, or villages.
(e) Contiguous or adjacent cities, towns, or villages means cities,
towns, or villages whose borders touch each other or whose borders are
within 10 road miles of each other at their closest points. The
property line of an office located in an unincorporated city, town, or
village is the boundary line of that city, town, or village for the
purpose of this definition.
(f) Critical means important to restoring or maintaining a
depository
[[Page 40306]]
organization's safe and sound operations.
(g) Depository holding company means a bank holding company or a
savings and loan holding company (as more fully defined in section 202
of the Interlocks Act (12 U.S.C. 3201)) having its principal office
located in the United States.
(h) Depository institution means a commercial bank (including a
private bank), a savings bank, a trust company, a savings and loan
association, a building and loan association, a homestead association,
a cooperative bank, an industrial bank, or a credit union, chartered
under the laws of the United States and having a principal office
located in the United States. Additionally, a United States office,
including a branch or agency, of a foreign commercial bank is a
depository institution.
(i) Depository institution affiliate means a depository institution
that is an affiliate of a depository organization.
(j) Depository organization means a depository institution or a
depository holding company.
(k) Low- and moderate-income areas means census tracts (or, if an
area is not in a census tract, block numbering areas delineated by the
United States Bureau of the Census) where the median family income is
less than 100 percent of the area median income.
(l) Management official. (1) The term management official means:
(i) A director;
(ii) An advisory or honorary director of a depository institution
with total assets of $100 million or more;
(iii) A senior executive officer as that term is defined in 12 CFR
303.14(a)(3);
(iv) A branch manager;
(v) A trustee of a depository organization under the control of
trustees; and
(vi) Any person who has a representative or nominee serving in any
of the capacities in this paragraph (l)(1).
(2) The term management official does not include:
(i) A person whose management functions relate exclusively to the
business of retail merchandising or manufacturing;
(ii) A person whose management functions relate principally to the
business outside the United States of a foreign commercial bank; or
(iii) A person described in the provisos of section 202(4) of the
Interlocks Act (12 U.S.C. 3201(4)) (referring to an officer of a State-
chartered savings bank, cooperative bank, or trust company that neither
makes real estate mortgage loans nor accepts savings).
(m) Office means a principal or branch office of a depository
institution located in the United States. Office does not include a
representative office of a foreign commercial bank, an electronic
terminal, or a loan production office.
(n) Person means a natural person, corporation, or other business
entity.
(o) Relevant metropolitan statistical area (RMSA) means an MSA, a
primary MSA, or a consolidated MSA that is not comprised of designated
Primary MSAs to the extent that these terms are defined and applied by
the Office of Management and Budget.
(p) Representative or nominee means a natural person who serves as
a management official and has an obligation to act on behalf of another
person with respect to management responsibilities. The FDIC will find
that a person has an obligation to act on behalf of another person only
if the first person has an agreement, express or implied, to act on
behalf of the second person with respect to management
responsibilities. The FDIC will determine, after giving the affected
persons an opportunity to respond, whether a person is a representative
or nominee.
(q) Total assets. (1) The term total assets includes assets
measured on a consolidated basis and reported in the most recent fiscal
year-end Consolidated Report of Condition and Income.
(2) The term total assets does not include:
(i) Assets of a diversified savings and loan holding company as
defined by section 10(a)(1)(F) of the Home Owners' Loan Act (12 U.S.C.
1467a(a)(1)(F)) other than the assets of its depository institution
affiliate;
(ii) Assets of a bank holding company that are exempt from the
prohibitions of section 4 of the Bank Holding Company Act of 1956
pursuant to an order issued under section 4(d) of that Act (12 U.S.C.
1843(d)) other than the assets of its depository institution affiliate;
or
(iii) Assets of offices of a foreign commercial bank other than the
assets of its United States branch or agency.
(r) United States means the United States of America, any State or
territory of the United States of America, the District of Columbia,
Puerto Rico, Guam, American Samoa, and the Virgin Islands.
Sec. 348.3 Prohibitions.
(a) Community. A management official of a depository organization
may not serve at the same time as a management official of an
unaffiliated depository organization if the depository organizations in
question (or a depository institution affiliate thereof) have offices
in the same community.
(b) RMSA. A management official of a depository organization may
not serve at the same time as a management official of an unaffiliated
depository organization if the depository organizations in question (or
a depository institution affiliate thereof) have offices in the same
RMSA and each depository organization has total assets of $20 million
or more.
(c) Major assets. A management official of a depository
organization with total assets exceeding $1 billion (or any affiliate
thereof) may not serve at the same time as a management official of an
unaffiliated depository organization with total assets exceeding $500
million (or any affiliate thereof), regardless of the location of the
two depository organizations.
Sec. 348.4 Interlocking relationships permitted by statute.
The prohibitions of Sec. 348.3 do not apply in the case of any one
or more of the following organizations or to a subsidiary thereof:
(a) A depository organization that has been placed formally in
liquidation, or which is in the hands of a receiver, conservator, or
other official exercising a similar function;
(b) A corporation operating under section 25 or section 25A of the
Federal Reserve Act (12 U.S.C. 601 et seq. and 12 U.S.C. 611 et seq.,
respectively) (Edge Corporations and Agreement Corporations);
(c) A credit union being served by a management official of another
credit union;
(d) A depository organization that does not do business within the
United States except as an incident to its activities outside the
United States;
(e) A State-chartered savings and loan guaranty corporation;
(f) A Federal Home Loan bank or any other bank organized solely to
serve depository institutions (a bankers' bank) or solely for the
purpose of providing securities clearing services and services related
thereto for depository institutions and securities companies;
(g) A depository organization that is closed or is in danger of
closing as determined by the appropriate Federal depository
institutions regulatory agency and is acquired by another depository
organization. This exemption lasts for five years, beginning on the
date the depository organization is acquired;
(h) A savings association whose acquisition has been authorized on
an emergency basis in accordance with section 13(k) of the Federal
Deposit
[[Page 40307]]
Insurance Act (12 U.S.C. 1823(k)) with resulting dual service by a
management official that would otherwise be prohibited under the
Interlocks Act which may continue for up to 10 years from the date of
the acquisition provided that the FDIC has given its approval for the
continuation of such service; and
(i)(1) A diversified savings and loan holding company (as defined
in section 10(a)(1)(F) of the Home Owners' Loan Act (12 U.S.C.
1467a(a)(1)(F)) with respect to the service of a director of such
company who is also a director of an unaffiliated depository
organization if:
(i) Both the diversified savings and loan holding company and the
unaffiliated depository organization notify their appropriate Federal
depository institutions regulatory agency at least 60 days before the
dual service is proposed to begin; and
(ii) The appropriate regulatory agency does not disapprove the dual
service before the end of the 60-day period.
(2) The FDIC may disapprove a notice of proposed service if it
finds that:
(i) The service cannot be structured or limited so as to preclude
an anticompetitive effect in financial services in any part of the
United States;
(ii) The service would lead to substantial conflicts of interest or
unsafe or unsound practices; or
(iii) The notificant failed to furnish all the information required
by the FDIC.
(3) The FDIC may require that any interlock permitted under this
paragraph (h) be terminated if a change in circumstances occurs with
respect to one of the interlocked depository organizations that would
have provided a basis for disapproval of the interlock during the
notice period.
Sec. 348.5 Regulatory Standards exemption.
(a) Criteria. The FDIC may permit an interlock that otherwise would
be prohibited by the Interlocks Act and Sec. 348.3 if:
(1) The board of directors of the depository organization (or the
organizers of a depository organization being formed) that seeks the
exemption provides a resolution to the FDIC certifying that the
organization, after the exercise of reasonable efforts, is unable to
locate any other candidate from the community or RMSA, as appropriate,
who:
(i) Possesses the level of expertise required by the depository
organization and who is not prohibited from service by the Interlocks
Act; and
(ii) Is willing to serve as a management official; and
(2) The FDIC, after reviewing an application submitted by the
depository organization seeking the exemption, determines that:
(i) The management official is critical to the safe and sound
operations of the affected depository organization; and
(ii) Service by the management official will not produce an
anticompetitive effect with respect to the depository organization.
(b) Presumptions. The FDIC applies the following presumptions when
reviewing any application for a Regulatory Standards exemption:
(1) An interlock will not have an anticompetitive effect if it
involves depository organizations that, if merged, would not cause the
post-merger Herfindahl-Hirschman Index (HHI) to exceed 1800 and would
not cause the HHI to increase by more than 200 points. This presumption
shall not apply to depository organizations subject to the Major Assets
prohibition of Sec. 348.3(c).
(2) A proposed management official is critical to the safe and
sound operations of a depository institution if:
(i) That official is approved by the FDIC to serve as a director or
a senior executive officer of that institution pursuant to 12 CFR
303.14; and
(ii) The institution had operated for less than two years, was not
in compliance with minimum capital requirements, or otherwise was in a
``troubled condition'' as defined by 12 CFR 303.14(a)(4) at the time
the service under that section was approved.
(c) Duration of interlock. An interlock permitted under this
section may continue until the FDIC notifies the affected depository
organizations otherwise. The FDIC may require termination of any
interlock permitted under this section if the FDIC concludes, after
giving the affected persons the opportunity to respond, that the
determinations under paragraph (a)(2) of this section no longer may be
made. A management official may continue serving the depository
organization involved in the interlock for a period of 15 months
following the date of the order to terminate the interlock. The FDIC
may shorten this period under appropriate circumstances.
Sec. 348.6 Management Consignment exemption.
(a) Criteria. The FDIC may permit an interlock that otherwise would
be prohibited by the Interlocks Act and Sec. 348.3 if the FDIC, after
reviewing an application submitted by the depository organization
seeking an exemption, determines that the interlock would:
(1) Improve the provision of credit to low- and moderate-income
areas;
(2) Increase the competitive position of a minority- or women-owned
depository organization;
(3) Strengthen the management of a depository institution that has
been chartered for less than two years at the time an application is
filed under this part; or
(4) Strengthen the management of a depository institution that is
in an unsafe or unsound condition as determined by the FDIC on a case-
by-case basis.
(b) Presumptions. The FDIC applies the following presumptions when
reviewing any application for a Management Consignment exemption:
(1) A proposed management official is capable of strengthening the
management of a depository institution described in paragraph (a)(3) of
this section if that official is approved by the FDIC to serve as a
director or a senior executive officer of that institution pursuant to
12 CFR 303.14 and the institution had operated for less than two years
at the time the service under 12 CFR 303.14 was approved; and
(2) A proposed management official is capable of strengthening the
management of a depository institution described in paragraph (a)(4) of
this section if that official is approved by the FDIC to serve as a
director or a senior executive officer of that institution pursuant to
12 CFR 303.14 and the institution was not in compliance with minimum
capital requirements or otherwise was in a ``troubled condition'' as
defined under 12 CFR 303.14 at the time service under that section was
approved.
(c) Duration of interlock. An interlock granted under this section
may continue for a period of two years from the date of approval. The
FDIC may extend this period for one additional two-year period if the
depository organization applies for an extension at least 30 days
before the current exemption expires and satisfies one of the criteria
specified in paragraph (a) of this section. The provisions set forth in
paragraph (b) of this section also apply to applications for
extensions.
Sec. 348.7 Change in circumstances.
(a) Termination. A management official shall terminate his or her
service or apply for an exemption to the Interlocks Act if a change in
circumstances causes the service to become prohibited under that Act. A
change in circumstances may include, but is not limited to, an increase
in asset size of an organization, a change in the delineation of the
RMSA or community, the establishment of an office, an acquisition, a
merger, a consolidation,
[[Page 40308]]
or any reorganization of the ownership structure of a depository
organization that causes a previously permissible interlock to become
prohibited.
(b) Transition period. A management official described in paragraph
(a) of this section may continue to serve the insured nonmember bank
involved in the interlock for 15 months following the date of the
change in circumstances. The FDIC may shorten this period under
appropriate circumstances.
Sec. 348.8 Enforcement.
Except as provided in this section, the FDIC administers and
enforces the Interlocks Act with respect to insured nonmember banks and
their affiliates and may refer any case of a prohibited interlocking
relationship involving these entities to the Attorney General of the
United States to enforce compliance with the Interlocks Act and this
part. If an affiliate of an insured nonmember bank is subject to the
primary regulation of another federal depository organization
supervisory agency, then the FDIC does not administer and enforce the
Interlocks Act with respect to that affiliate.
Dated at Washington, DC, this 16th day of July, 1996.
By order of the Board of Directors.
Federal Deposit Insurance Corporation
Robert E. Feldman,
Deputy Executive Secretary.
Office of Thrift Supervision
12 CFR Chapter V
Authority and Issuance
For the reasons set out in the joint preamble, the OTS revises part
563f of chapter V of title 12 of the Code of Federal Regulations to
read as follows:
PART 563f--MANAGEMENT OFFICIAL INTERLOCKS
Sec.
563f.1 Authority, purpose, and scope.
563f.2 Definitions.
563f.3 Prohibitions.
563f.4 Interlocking relationships permitted by statute.
563f.5 Regulatory Standards exemption.
563f.6 Management Consignment exemption.
563f.7 Change in circumstances.
563f.8 Enforcement.
563f.9 Interlocking relationships permitted pursuant to Federal
Deposit Insurance Act.
Authority: 12 U.S.C. 3201-3208.
Sec. 563f.1 Authority, purpose, and scope.
(a) Authority. This part is issued under the provisions of the
Depository Institution Management Interlocks Act (Interlocks Act) (12
U.S.C. 3201 et seq.), as amended.
(b) Purpose. The purpose of the Interlocks Act and this part is to
foster competition by generally prohibiting a management official from
serving two nonaffiliated depository organizations in situations where
the management interlock likely would have an anticompetitive effect.
(c) Scope. This part applies to management officials of savings
associations, savings and loan holding companies, and affiliates of
either.
Sec. 563f.2 Definitions.
For purposes of this part, the following definitions apply:
(a) Affiliate. (1) The term affiliate has the meaning given in
section 202 of the Interlocks Act (12 U.S.C. 3201). For purposes of
that section 202, shares held by an individual include shares held by
members of his or her immediate family. ``Immediate family'' means
spouse, mother, father, child, grandchild, sister, brother, or any of
their spouses, whether or not any of their shares are held in trust.
(2) For purposes of section 202(3)(B) of the Interlocks Act (12
U.S.C. 3201(3)(B)), an affiliate relationship involving a savings
association or savings and loan holding company based on common
ownership does not exist if the OTS determines, after giving the
affected persons the opportunity to respond, that the asserted
affiliation was established in order to avoid the prohibitions of the
Interlocks Act and does not represent a true commonality of interest
between the depository organizations. In making this determination, the
OTS considers, among other things, whether a person, including members
of his or her immediate family, whose shares are necessary to
constitute the group owns a nominal percentage of the shares of one of
the organizations and the percentage is substantially disproportionate
to that person's ownership of shares in the other organization.
(b) Anticompetitive effect means a monopoly or substantial
lessening of competition.
(c) Area median income means:
(1) The median family income for the metropolitan statistical area
(MSA), if a depository organization is located in an MSA; or
(2) The statewide nonmetropolitan median family income, if a
depository organization is located outside an MSA.
(d) Community means a city, town, or village, and contiguous or
adjacent cities, towns, or villages.
(e) Contiguous or adjacent cities, towns, or villages means cities,
towns, or villages whose borders touch each other or whose borders are
within 10 road miles of each other at their closest points. The
property line of an office located in an unincorporated city, town, or
village is the boundary line of that city, town, or village for the
purpose of this definition.
(f) Critical means important to restoring or maintaining a
depository organization's safe and sound operations.
(g) Depository holding company means a bank holding company or a
savings and loan holding company (as more fully defined in section 202
of the Interlocks Act (12 U.S.C. 3201)) having its principal office
located in the United States.
(h) Depository institution means a commercial bank (including a
private bank), a savings bank, a trust company, a savings and loan
association, a building and loan association, a homestead association,
a cooperative bank, an industrial bank, or a credit union, chartered
under the laws of the United States and having a principal office
located in the United States. Additionally, a United States office,
including a branch or agency, of a foreign commercial bank is a
depository institution.
(i) Depository institution affiliate means a depository institution
that is an affiliate of a depository organization.
(j) Depository organization means a depository institution or a
depository holding company.
(k) Low- and moderate-income areas means census tracts (or, if an
area is not in a census tract, block numbering areas delineated by the
United States Bureau of the Census) where the median family income is
less than 100 percent of the area median income.
(l) Management official. (1) The term management official means:
(i) A director;
(ii) An advisory or honorary director of a depository institution
with total assets of $100 million or more;
(iii) A senior executive officer as that term is defined in 12 CFR
574.9(a)(2);
(iv) A branch manager;
(v) A trustee of a depository organization under the control of
trustees; and
(vi) Any person who has a representative or nominee serving in any
of the capacities in this paragraph (l)(1).
(2) The term management official does not include:
(i) A person whose management functions relate exclusively to the
business of retail merchandising or manufacturing;
(ii) A person whose management functions relate principally to the
[[Page 40309]]
business outside the United States of a foreign commercial bank; or
(iii) A person described in the provisos of section 202(4) of the
Interlocks Act (12 U.S.C. 3201(4)) (referring to an officer of a State-
chartered savings bank, cooperative bank, or trust company that neither
makes real estate mortgage loans nor accepts savings).
(m) Office means a principal or branch office of a depository
institution located in the United States. Office does not include a
representative office of a foreign commercial bank, an electronic
terminal, or a loan production office.
(n) Person means a natural person, corporation, or other business
entity.
(o) Relevant metropolitan statistical area (RMSA) means an MSA, a
primary MSA, or a consolidated MSA that is not comprised of designated
Primary MSAs to the extent that these terms are defined and applied by
the Office of Management and Budget.
(p) Representative or nominee means a natural person who serves as
a management official and has an obligation to act on behalf of another
person with respect to management responsibilities. The OTS will find
that a person has an obligation to act on behalf of another person only
if the first person has an agreement, express or implied, to act on
behalf of the second person with respect to management
responsibilities. The OTS will determine, after giving the affected
persons an opportunity to respond, whether a person is a representative
or nominee.
(q) Savings association means:
(1) Any Federal savings association (as defined in section 3(b)(2)
of the Federal Deposit Insurance Act (12 U.S.C. 1813(b)(2));
(2) Any state savings association (as defined in section 3(b)(3) of
the Federal Deposit Insurance Act (12 U.S.C. 1813(b)(3)) the deposits
of which are insured by the Federal Deposit Insurance Corporation; and
(3) Any corporation (other than a bank as defined in section
3(a)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1813(a)(1)) the
deposits of which are insured by the Federal Deposit Insurance
Corporation, that the Board of Directors of the Federal Deposit
Insurance Corporation and the Director of the Office of Thrift
Supervision jointly determine to be operating in substantially the same
manner as a savings association.
(r) Total assets. (1) The term total assets means assets measured
on a consolidated basis and reported in the most recent fiscal year-end
Consolidated Report of Condition and Income.
(2) The term total assets does not include:
(i) Assets of a diversified savings and loan holding company as
defined by section 10(a)(1)(F) of the Home Owners' Loan Act (12 U.S.C.
1467a(a)(1)(F)) other than the assets of its depository institution
affiliate;
(ii) Assets of a bank holding company that is exempt from the
prohibitions of section 4 of the Bank Holding Company Act of 1956
pursuant to an order issued under section 4(d) of that Act (12 U.S.C.
1843(d)) other than the assets of its depository institution affiliate;
or
(iii) Assets of offices of a foreign commercial bank other than the
assets of its United States branch or agency.
(s) United States means the United States of America, any State or
territory of the United States of America, the District of Columbia,
Puerto Rico, Guam, American Samoa, and the Virgin Islands.
Sec. 563f.3 Prohibitions.
(a) Community. A management official of a depository organization
may not serve at the same time as a management official of an
unaffiliated depository organization if the depository organizations in
question (or a depository institution affiliate thereof) have offices
in the same community.
(b) RMSA. A management official of a depository organization may
not serve at the same time as a management official of an unaffiliated
depository organization if the depository organizations in question (or
a depository institution affiliate thereof) have offices in the same
RMSA and each depository organization has total assets of $20 million
or more.
(c) Major assets. A management official of a depository
organization with total assets exceeding $1 billion (or any affiliate
thereof) may not serve at the same time as a management official of an
unaffiliated depository organization with total assets exceeding $500
million (or any affiliate thereof), regardless of the location of the
two depository organizations.
Sec. 563f.4 Interlocking relationships permitted by statute.
The prohibitions of Sec. 563f.3 do not apply in the case of any one
or more of the following organizations or to a subsidiary thereof:
(a) A depository organization that has been placed formally in
liquidation, or which is in the hands of a receiver, conservator, or
other official exercising a similar function;
(b) A corporation operating under section 25 or section 25A of the
Federal Reserve Act (12 U.S.C. 601 et seq. and 12 U.S.C. 611 et seq.,
respectively) (Edge Corporations and Agreement Corporations);
(c) A credit union being served by a management official of another
credit union;
(d) A depository organization that does not do business within the
United States except as an incident to its activities outside the
United States;
(e) A State-chartered savings and loan guaranty corporation;
(f) A Federal Home Loan Bank or any other bank organized solely to
serve depository institutions (a bankers' bank) or solely for the
purpose of providing securities clearing services and services related
thereto for depository institutions and securities companies;
(g) A depository organization that is closed or is in danger of
closing as determined by the appropriate Federal depository
institutions regulatory agency and is acquired by another depository
organization. This exemption lasts for five years, beginning on the
date the depository organization is acquired;
(h)(1) A diversified savings and loan holding company (as defined
in section 10(a)(1)(F) of the Home Owners' Loan Act (12 U.S.C.
1467a(a)(1)(F)) with respect to the service of a director of such
company who also is a director of an unaffiliated depository
organization if:
(i) Both the diversified savings and loan holding company and the
unaffiliated depository organization notify their appropriate Federal
depository institutions regulatory agency at least 60 days before the
dual service is proposed to begin; and
(ii) The appropriate regulatory agency does not disapprove the dual
service before the end of the 60-day period.
(2) The OTS may disapprove a notice of proposed service if it finds
that:
(i) The service cannot be structured or limited so as to preclude
an anticompetitive effect in financial services in any part of the
United States;
(ii) The service would lead to substantial conflicts of interest or
unsafe or unsound practices; or
(iii) The notificant failed to furnish all the information required
by the OTS.
(3) The OTS may require that any interlock permitted under this
paragraph (h) be terminated if a change in circumstances occurs with
respect to one of the interlocked depository organizations that would
have provided a basis for disapproval of the interlock during the
notice period; and
(i) Any savings association or any savings and loan holding company
(as defined in section 10(a)(1)(D) of the Home Owners' Loan Act) which
has
[[Page 40310]]
issued stock in connection with a qualified stock issuance pursuant to
section 10(q) of such Act, except that this paragraph (i) shall apply
only with regard to service by a single management official of such
savings association or holding company, or any subsidiary of such
savings association or holding company, by a single management official
of the savings and loan holding company which purchased the stock
issued in connection with such qualified stock issuance, and shall
apply only when the OTS has determined that such service is consistent
with the purposes of the Interlocks Act and the Home Owners' Loan Act.
Sec. 563f.5 Regulatory Standards exemption.
(a) Criteria. The OTS may permit an interlock that otherwise would
be prohibited by the Interlocks Act and Sec. 563f.3 if:
(1) The board of directors of the depository organization (or the
organizers of a depository organization being formed) that seeks the
exemption provides a resolution to the OTS certifying that the
organization, after the exercise of reasonable efforts, is unable to
locate any other candidate from the community or RMSA, as appropriate,
who:
(i) Possesses the level of expertise required by the depository
organization and who is not prohibited from service by the Interlocks
Act; and
(ii) Is willing to serve as a management official; and
(2) The OTS, after reviewing an application submitted by the
depository organization seeking the exemption, determines that:
(i) The management official is critical to the safe and sound
operations of the affected depository organization; and
(ii) Service by the management official will not produce an
anticompetitive effect with respect to the depository organization.
(b) Presumptions. The OTS applies the following presumptions when
reviewing any application for a Regulatory Standards exemption:
(1) An interlock will not have an anticompetitive effect if it
involves depository organizations that, if merged, would not cause the
post-merger Herfindahl-Hirschman Index (HHI) to exceed 1800 and would
not cause the HHI to increase by more than 200 points. This presumption
shall not apply to depository organizations subject to the Major Assets
prohibition of Sec. 563f.3(c).
(2) A proposed management official is critical to the safe and
sound operations of a depository institution if:
(i) That official is approved by the OTS to serve as a director or
senior executive officer of that institution pursuant to 12 CFR 574.9;
and
(ii) The institution had operated for less than two years, was not
in compliance with minimum capital requirements, or otherwise was in a
``troubled condition'' as defined in 12 CFR 574.9 at the time the
service under that section was approved.
(c) Duration of interlock. An interlock permitted under this
section may continue until the OTS notifies the affected depository
organizations otherwise. The OTS may require termination of any
interlock permitted under this section if the OTS concludes, after
giving the affected persons the opportunity to respond, that the
determinations under paragraph (a)(2) of this section no longer may be
made. A management official may continue serving the depository
organization involved in the interlock for a period of 15 months
following the date of the order to terminate the interlock, unless the
order terminating the interlock provides otherwise.
Sec. 563f.6 Management Consignment exemption.
(a) Criteria. The OTS may permit an interlock that otherwise would
be prohibited by the Interlocks Act and Sec. 563f.3 if the OTS, after
reviewing an application submitted by the depository organization
seeking an exemption, determines that the interlock would:
(1) Improve the provision of credit to low- and moderate-income
areas;
(2) Increase the competitive position of a minority- or women-owned
depository organization;
(3) Strengthen the management of a depository institution that has
been chartered for less than three years at the time an application is
filed under this part; or
(4) Strengthen the management of a depository institution that is
in an unsafe or unsound condition as determined by the OTS on a case-
by-case basis.
(b) Presumptions. The OTS applies the following presumptions when
reviewing any application for a Management Consignment exemption:
(1) A proposed management official is capable of strengthening the
management of a depository institution described in paragraph (a)(3) of
this section if that official is approved by the OTS to serve as a
director or senior executive officer of that institution pursuant to 12
CFR 574.9 and the institution had operated for less than two years at
the time the service under 12 CFR 574.9 was approved; and
(2) A proposed management official is capable of strengthening the
management of a depository institution described in paragraph (a)(4) of
this section if that official is approved by the OTS to serve as a
director or senior executive officer of that institution pursuant to 12
CFR 574.9 and the institution was not in compliance with minimum
capital requirements or otherwise was in a ``troubled condition'' as
defined under 12 CFR 574.9 at the time service under that section was
approved.
(c) Duration of interlock. An interlock granted under this section
may continue for a period of two years from the date of approval. The
OTS may extend this period for one additional two-year period if the
depository organization applies for an extension at least 30 days
before the current exemption expires and satisfies one of the criteria
specified in paragraph (a) of this section. The provisions set forth in
paragraph (b) of this section also apply to applications for
extensions.
Sec. 563f.7 Change in circumstances.
(a) Termination. A management official shall terminate his or her
service or apply for an exemption to the Interlocks Act if a change in
circumstances causes the service to become prohibited under that Act. A
change in circumstances may include, but is not limited to, an increase
in asset size of an organization, a change in the delineation of the
RMSA or community, the establishment of an office, an acquisition, a
merger, a consolidation, or any reorganization of the ownership
structure of a depository organization that causes a previously
permissible interlock to become prohibited.
(b) Transition period. A management official described in paragraph
(a) of this section may continue to serve the depository organization
involved in the interlock for 15 months following the date of the
change in circumstances. The OTS may shorten this period under
appropriate circumstances.
Sec. 563f.8 Enforcement.
Except as provided in this section, the OTS administers and
enforces the Interlocks Act with respect to savings associations,
savings and loan holding companies, and affiliates of either, and may
refer any case of a prohibited interlocking relationship involving
these entities to the Attorney General of the United States to enforce
compliance with the Interlocks Act and this part. If an affiliate of a
savings association or savings and loan holding company is subject to
the primary regulation of another Federal depository organization
[[Page 40311]]
supervisory agency, then the OTS does not administer and enforce the
Interlocks Act with respect to that affiliate.
Sec. 563f.9 Interlocking relationships permitted pursuant to Federal
Deposit Insurance Act.
A management official or prospective management official of a
depository organization may enter into an otherwise prohibited
interlocking relationship with another depository organization for a
period of up to 10 years if such relationship is approved by the
Federal Deposit Insurance Corporation pursuant to section
13(k)(1)(A)(v) of the Federal Deposit Insurance Act, as amended (12
U.S.C. 1823(k)(1)(A)(v)).
Dated: July 1, 1996.
Jonathan L. Fiechter,
Acting Director.
[FR Doc. 96-19400 Filed 8-1-96; 8:45 am]
BILLING CODE 4810-33-P; 6210-01-P; 6714-01-P; 6720-01-P
