[Federal Register Volume 60, Number 250 (Friday, December 29, 1995)]
[Proposed Rules]
[Pages 67424-67441]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-30972]
[[Page 67423]]
_______________________________________________________________________
Part III
Department of the Treasury
Office of the Comptroller of the Currency
12 CFR Part 26
Federal Reserve System
12 CFR Part 212
Federal Deposit Insurance Corporation
12 CFR Part 348
Department of the Treasury
Office of Thrift Supervision
12 CFR Part 563f
_______________________________________________________________________
Management Official Interlocks; Proposed Rule
Federal Register / Vol. 60, No. 250 / Friday, December 29, 1995 /
Proposed Rules
[[Page 67424]]
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
12 CFR Part 26
[Docket No. 95-31]
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. 95-204]
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 notice of proposed rulemaking.
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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) propose to revise their rules regarding
management interlocks. The proposal conforms the interlocks rules to
recent statutory changes, modernizes and clarifies the rules, and
reduces unnecessary regulatory burdens where feasible, consistent with
statutory requirements.
DATES: Comments must be received by February 27, 1996.
ADDRESSES: Comments should be directed to:
OCC: Office of the Comptroller of the Currency, Communications
Division, 250 E Street, SW, Washington, DC 20219, Attention: Docket No.
95-31. Comments will be available for public inspection and
photocopying at the same location. In addition, comments may be sent by
facsimile transmission to FAX number (202) 874-5274 or by internet mail
to [email protected]
Board: William W. Wiles, Secretary, Board of Governors of the
Federal Reserve System, Docket No. R-0907, 20th Street and Constitution
Avenue, NW, Washington, DC 20551. Comments addressed to Mr. Wiles may
also be delivered to the Board's mail room between 8:45 a.m. and 5:15
p.m., and to the security control room outside of those hours. Both the
mail room and control room are accessible from the courtyard entrance
on 20th Street between Constitution Avenue and C Street, NW. Comments
may be inspected in room MP-500 between 9:00 a.m. and 5:00 p.m., except
as provided in Sec. 261.8 of the Board's Rules Regarding Availability
of Information, 12 CFR 261.8.
FDIC: Jerry L. Langley, Executive Secretary, Attention: Room F-402,
Federal Deposit Insurance Corporation, 550 17th Street, NW, Washington,
DC 20429. Comments may be delivered to room F-400, 1776 F Street, NW,
Washington, DC 20429, on business days between 8:30 a.m. and 5:00 p.m.
or sent by facsimile transmission to FAX number 202/898-3838. Internet:
[email protected] Comments will be available for inspection and
photocopying in room 7118, 550 17th Street, NW, Washington, DC 20429,
between 8:30 a.m. and 5:00 p.m. on business days.
OTS: Chief, Dissemination Branch, Records Management and
Information Policy, Office of Thrift Supervision, 1700 G Street, NW,
Washington, DC 20552, Attention Docket No. 95-204. These submissions
may be hand delivered to 1700 G Street, NW, from 9:00 A.M. to 5:00 P.M.
on business days; they may be sent by facsimile transmission to FAX
number (202) 906-7755. Comments over 25 pages in length should be sent
to FAX number (202) 906-6956. Comments will be available for inspection
at 1700 G Street, NW, from 9:00 A.M. until 4:00 P.M. on business days.
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.
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 (TTD), 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 Miller, 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
OCC, OTS, Board, and FDIC 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 regulation with these purposes in mind
and, as is explained in greater detail in the text that follows,
propose to amend the regulations in ways designed to meet the goals of
section 303(a).\1\
\1\ The National Credit Union Administration has participated in
the interagency effort to revise the management interlocks
regulations and intends to publish a separate Notice of Proposed
Rulemaking revising 12 CFR part 711 in the near future.
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Summary of Statutory Changes
The CDRI Act amended the Depository Institution Management
Interlocks Act (12 U.S.C. 3201-3208) (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.\2\
\2\ 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.
[[Page 67425]]
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After the changes made by the CDRI Act, a person subject to the
Interlocks Act's restrictions seeking an exemption from those
restrictions must qualify either for a ``regulatory standards''
exemption (the Regulatory Standards exemption) or an exemption under a
``management official consignment program'' (the 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 improve the provision of
credit to low- and moderate-income areas, increase the competitive
position of a minority- or woman-owned institution, or 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 newly chartered institutions or institutions that
are in an unsafe or unsound condition.)
The proposal reflects these statutory changes, and streamlines and
clarifies the interlocks regulations in various respects. These changes
are discussed in the text that follows. The agencies invite comments on
all aspects of this proposal.
Discussion
The following is a section-by-section discussion of the proposed
revisions.
Authority, Purpose, and Scope
This section in the agencies' current regulations 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 currently identifies the types of
institutions to which each agency's regulation applies.
The proposed rule restates these provisions and, in the OCC
proposed 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 proposed Sec. 26.2(k).)
Definitions
Each of the agencies' current regulations sets forth definitions of
key terms used in the regulation.
The proposed regulations change some of the current definitions. A
discussion of the substantive differences between the current rules and
proposals follows.
Anticompetitive Effect
The current regulations neither use nor define the term
``anticompetitive effect.''
The proposed regulations define the term to mean ``a monopoly or
substantial lessening of competition.'' This term is used in the
Regulatory Standards exemption. Under that 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
proposed definition preserves the free flow of credit and other banking
services that the Interlocks Act is designed to protect. Another
benefit of the proposed definition is that it is familiar to the
banking industry, given that it is derived from the Bank Merger Act (12
U.S.C. 1828(c)). This enables the agencies to accomplish the
legislative purpose of the Interlocks Act without imposing unnecessary
regulatory burdens.
Area Median Income
The current regulations do not use the term ``area median income,''
and, therefore, do not define this term.
The proposed regulations define ``area median income'' as the
median family income for the metropolitan statistical area (MSA) in
which an institution is located or the statewide nonmetropolitan median
family income if an institution is located outside an MSA. This term is
used in the definition of ``low- and moderate-income areas,'' which in
turn is used in the implementation of the Management Consignment
exemption.
Contiguous or Adjacent Cities, Towns, or Villages
The current regulations define ``adjacent cities, towns, or
villages'' as cities, towns, or villages whose borders are within 10
road miles from each other. They also define ``contiguous cities,
towns, or villages'' as cities, towns, or villages whose borders touch.
The statute and regulations apply these terms to prohibit interlocks
involving small institutions that are located in contiguous or adjacent
cities, towns, or villages.
The proposed regulations combine these two definitions, given that
contiguous cities, towns, or villages necessarily are within 10 miles
of each other.
Critical
The current regulations neither use nor define ``critical.''
The proposed regulations define the term in connection with 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 define
``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 practically 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.
This proposal addresses the issue by stating that the agencies will
consider a person to be critical to a depository organization if the
person will play an important role in helping the institution either
address current problems or maintain safe and sound operations going
forward. The agencies believe that this approach is consistent with the
[[Page 67426]]
legislative intent by insuring that only persons of demonstrated
expertise and importance to the institution will be allowed to serve
pursuant to a Regulatory Standards exemption.
Low- and Moderate-Income Areas
The current regulations permit interlocks under certain
circumstances involving a depository organization located ``in a low
income or other economically depressed area.'' However, the current
rules do not define ``low income'' or ``economically depressed.''
Section 209(c)(1)(A) of the Interlocks Act (12 U.S.C.
3207(c)(1)(A)) authorizes the appropriate agency to permit interlocks
pursuant to the Management Consignment exemption if the agency
determines that the proposed service would ``improve the provision of
credit to low- and moderate-income areas.'' The proposed regulations
define ``low- and moderate-income areas'' as areas where the median
family income is less than 100 percent of the area median income. This
definition is consistent with Title I, Subtitle A of the CDRI Act (the
Community Development Banking and Financial Institutions Act of 1994)
(12 U.S.C. 4701-4718), which, like the Management Consignment exemption
affecting institutions in low- and moderate-income areas, is intended
to assist the flow of credit into economically depressed areas. Section
103(17) of the CDRI Act (12 U.S.C. 4702(17)) defines ``low income'' to
mean not more than 80 percent of the area median income. The agencies
believe that Congress, by using the term ``low- and moderate-income''
in the Management Consignment exemption, intended for that term to
apply to an area where the median family income exceeds 80 percent of
the median income for the area. The agencies have selected 100 percent
of the area median income as the cutoff for defining ``low- and
moderate-income areas'' because they believe that a higher threshold
would permit interlocks that would not improve the provision of credit
to low- and moderate-income areas.
Management Official
The current regulations define ``management official'' to include
an employee or officer ``with management functions'' (including a
branch manager), a director, 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 proposed regulations adopt the definition of ``management
official'' set forth in the current rules, except that the phrase ``an
employee or officer with management functions'' is removed. It is
replaced by the term ``senior executive officer'' as defined by each of
the agencies in their regulations 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).
The agencies are proposing this change to eliminate the uncertainty
and attendant compliance burden created by the ambiguous term
``management functions.'' The proposals 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. The agencies
request comment on the advisability of defining ``management official''
by using ``senior executive officer'' rather than ``employee or officer
with management functions.''
The current definition of ``management official'' exempts those
individuals whose management functions relate to retail merchandising
or manufacturing. Stated another way, the current exemption applies to
a category of persons whose responsibilities are unrelated to the
business of a deposit-taking institution.
The agencies specifically ask commenters to address whether the
agencies should exempt a broader category of management officials whose
duties are unrelated to the provision of financial services by a
depository institution or depository holding company, and if so, how
the agencies should define that category of excluded officials.
Relevant Metropolitan Statistical Area (RMSA)
The current regulations define ``relevant metropolitan statistical
area'' as an MSA, a primary MSA, or a consolidated MSA that is not
comprised of designated primary MSAs as defined by the Office of
Management and Budget (OMB). This definition is derived from section
203(1) of the Interlocks Act (12 U.S.C. 3202(1)).
The proposed regulations define ``relevant metropolitan statistical
area (RMSA)'' as an MSA, a primary MSA, or a consolidated MSA that is
not comprised of designated primary MSAs, to the extent that the OMB
defines and applies these terms. This change reflects the fact that the
OMB defines ``consolidated MSA'' to include two or more primary MSAs.
Given that consolidated MSAs, by the OMB's definition, are comprised of
primary MSAs, the reference to consolidated MSAs in the Interlocks Act
and the agencies' regulations is inappropriate. The proposed change
enables 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 current regulations define ``representative or nominee'' as a
person who serves as a management official and has an express or
implied obligation to act on behalf of another person with respect to
management responsibilities. The current definition goes on to state
that the determination of whether someone is a representative or
nominee depends on the facts of a particular case and that certain
relationships (such as family, employment, and so on) may evidence an
express or implied obligation to act.
The proposed regulations also define ``representative or nominee''
as someone who serves as a management official and has an obligation to
act on behalf of someone else. The proposed definition deletes the rest
of the current definition, however, and inserts 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. The
agencies propose this change to clarify that the determination that a
representative or nominee situation exists will depend on whether there
is a basis to conclude that an agreement exists to act on someone's
behalf. The agencies note that the current definition provides specific
guidance for determining when a representative or nominee relationship
might be found to exist, and request comment on whether the current
definition, the proposed definition, or another definition is
preferable.
Prohibitions
The current regulations prohibit interlocks in the following three
[[Page 67427]]
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
exceeding $20 million and the depository organizations (or depository
institution affiliates of either) have depository institution offices
in the same RMSA.3 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.
3 A community as that term is defined in the proposals is
smaller than an RMSA. There may be several communities in one RMSA.
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The proposed regulations amend the rules as they apply to
institutions with assets of less than $20 million to better conform to
the purposes of the Interlocks Act. Whereas the current rules prohibit
interlocks in an RMSA if one of the organizations has total assets of
$20 million or more, the proposed rules would 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 would continue to be prohibited.
The agencies believe that this proposed 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, 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, interlocks involving one institution with
assets under $20 million and another institution with assets of at
least $20 million not in the same community are not likely to lead to
the anticompetitive conduct that the Interlocks Act is designed to
prohibit.
The agencies believe, moreover, that the proposed 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.
The proposed regulations reflect the change affecting depository
organizations with less than $20 million in total assets. They also set
forth the prohibition against interlocks involving large depository
organizations but do not change the substance of that prohibition. The
proposed regulations change the style of all three prohibitions in
order to make them easier to understand.
The agencies invite comment on any aspect of this proposed section.
The agencies specifically seek comment on whether the proposed
reinterpretation of 12 U.S.C. 3202(1) might result in anticompetitive
effects and thus run counter to the legislative intent of the
Interlocks Act. For example, could the proposed change enable a large
bank to engage in anticompetitive conduct by creating interlocks with
one or more smaller depository institutions located in the same RMSA
but not in the same community (a ``hub and spokes'' interlock)? The
agencies also seek comment on whether the final rule should
specifically address such situations.
Interlocking Relationships Expressly Permitted by Statute
The current regulations restate most of the exemptions that are
expressly permitted by the Interlocks Act and list those exemptions
that the agencies have permitted by regulation pursuant to the broad
exemptive authority that applied before the enactment of the CDRI Act.
The current regulations also address interlocks involving diversified
savings and loan holding companies.
The proposed regulations state the exemptions found in 12 U.S.C.
3204(1)-(8).4 The proposals 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.
4 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 proposes to
continue to list an additional exemption in its interlocks
regulation which 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 therefore proposes
to continue to list an additional exemption in its management
interlocks regulation which the other agencies do not list.
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Regulatory Standards Exemption
The current regulations contain no Regulatory Standards exemption.
The proposed regulations set forth the standards that a depository
organization must satisfy in order to obtain a Regulatory Standards
exemption. The proposal implements 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
candidates have been found after undertaking reasonable efforts to
locate other 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 proposed
``reasonableness'' standard is consistent with the legislative intent.
The proposed regulations 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.5
However, simply analyzing the HHI for the two organizations in a
potential interlock does not take into
[[Page 67428]]
account any anticompetitive effects that might stem from a previously
existing interlock. Accordingly, the agencies are requesting comments
as to how other interlocks involving depository organizations should be
viewed in applying this presumption.
\5\ 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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The second presumption to be applied by the agencies is 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.6
\6\ 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 agencies invite comment on the utility of the proposed
presumptions and on whether other presumptions also should apply.
The proposed regulations 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 are not proposing a specific
term for a permitted exemption. Instead, the agencies may require an
institution to terminate the interlock if an 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.
Grandfathered Interlocking Relationships--Removed
The current regulations restate the grandfather provisions set
forth in section 206 of the Interlocks Act (12 U.S.C. 3205). 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 satisfied the statutory criteria for obtaining an
extension.
The proposed regulations 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. The grandfathered exemptions will expire on
November 10, 1998, unless Congress amends the Interlocks Act again to
provide another opportunity for an extension.
Management Consignment Exemption
The current regulations set forth a number of instances in which
the agencies may permit an exemption to the Interlocks Act. However,
the statutory provisions authorizing the agencies to grant exemptions
have been amended, thereby requiring that the current regulations be
amended as well. The Management Consignment exemption set forth in
section 209(c) of the Interlocks Act (12 U.S.C. 3207(c)) is modelled
after certain exemptions that appear in the agencies' current
regulations.
The proposed regulations implement the Management Consignment
exemption, and restate the statutory criteria, with three
clarifications. First, the proposed 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 proposal clarifies that the exemption available for
``minority- and women-owned institutions'' is available for an
institution that is owned either by minorities or women. In noting the
types of exemptions 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 proposal permits 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 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 he [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 propose to permit exemptions
pursuant
[[Page 67429]]
to the Management Consignment exemption if the management official will
strengthen either a newly chartered institution or an institution that
is in an unsafe or unsound condition. Commenters are requested to
address this approach.
The proposals 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.7
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.''
\7\ 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 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.
---------------------------------------------------------------------------
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 woman-owned institutions. No presumption regarding
effects on competition is proposed, given that this is not a factor to
be considered by the agencies when reviewing an application for a
Management Consignment exemption.
The agencies seek comment on the utility of the proposed
presumptions and on whether additional presumptions should apply as
well.
The proposed regulations 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 proposed regulations 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.
Change in Circumstances
The current regulations 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.
The proposed regulations revise the style of this section in the
current regulations but not its substance.
The agencies seek comment on the proposed continued availability of
a grace period.
Enforcement
The current regulations set forth the jurisdiction of the agencies
that enforce the Interlocks Act.
The proposed regulations simplify the style of this section in the
current regulations but not its substance.
Small Market Share Exemption
In 1994, the OCC, Board, and FDIC published separate notices of
proposed rulemaking seeking comment on a proposed exemption for
interlocks involving institutions that, on a combined basis, would
control less than 20 percent of the deposits in a community or relevant
MSA. These agencies published small market share exemption proposals
pursuant to the broad exemptive authority vested in the agencies prior
to the enactment of the CDRI Act. However, as previously noted, the
CDRI Act amended the agencies' broad rulemaking authority by
authorizing the agencies to grant exemptions only in more narrow
circumstances. In light of this statutory change, the three agencies
believe that it would be inappropriate to adopt the proposed small
market share exemption. The FDIC already has withdrawn its proposal
regarding the small market share exemption (see 60 FR 7139 (February 7,
1995)). The OCC and Board hereby withdraw their respective proposals.
Paperwork Reduction Act
The OCC, FDIC, and OTS invite comment on:
(1) Whether the proposed collection of information contained in
this notice of proposed rulemaking is necessary for the proper
performance of each agency's functions, including whether the
information has practical utility;
(2) The accuracy of each agency's estimate of the burden of the
proposed information collection;
(3) Ways to enhance the quality, utility, and clarity of the
information to be collected; and
(4) Ways to minimize the burden of the information collection on
respondents, including through the use of automated collection
techniques or other forms of information technology.
Respondents are not required to respond to this collection of
information unless it displays a currently valid OMB control number.
OCC: The collection of information requirements contained in this
notice of proposed rulemaking have been submitted to 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 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 proposed 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 to evidence compliance with the
requirements of the Interlocks Act by national banks and District
banks. 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 proposed 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
Federal Reserve System, Washington, DC 20551.
The collection of information requirements in this proposed
rulemaking are found in 12 CFR
[[Page 67430]]
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 proposed 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.
Comments are invited on: (1) Whether the proposed revised
collections of information are necessary for the proper performance of
the Federal Reserve's functions, including whether the information has
practical utility; (2) the accuracy of the Federal Reserve's estimate
of the burden of the proposed information collections, including the
cost of compliance; (3) ways to enhance the quality, utility, and
clarity of the information to be collected; and (4) ways to minimize
the burden of information collection on respondents, including through
the use of automated collection techniques or other forms of
information technology.
FDIC: The collections of information contained in this notice of
proposed rulemaking have been submitted to 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 collections of information
should be sent to the Office of Management and Budget, Paperwork
Reduction Project (3604-0092), 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 proposed
regulation 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 to
evidence compliance with the requirements of the Interlocks Act as
amended by section 338 of the CDRI Act. 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
notice of proposed rulemaking have been submitted to 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), Washington, DC 20503, with copies
to the Business Transactions Division (1550), Office of Thrift
Supervision, 1700 G Street, NW, Washington, DC.
The collection of information requirements in this proposed 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 to evidence
compliance with the requirements of the Interlocks Act by savings
associations. The likely respondents are national 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 initial 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 general notice of proposed rulemaking.
Pursuant to section 605(b) of the RFA, the agencies hereby certify
that this proposed rule will not have a significant economic impact on
a substantial number of small entities. The agencies expect that this
proposal 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. Moreover, the changes to the exemptions
available are required by the Interlocks Act. Accordingly, a regulatory
flexibility analysis is not required.
Executive Order 12866
OCC and OTS: The OCC and OTS have determined that this proposal 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 proposed 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 a proposal.
The OCC and OTS have determined that the proposed 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.
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.
[[Page 67431]]
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 proposes to
revise 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, shares held by an individual include shares held by
members of his or her immediate family. ``Immediate family'' includes
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 with 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 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 areas where the median
family income is less than 100 percent of the area median income.
(m) Management official. (1) The term management official includes:
(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 paragraph (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.
(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
[[Page 67432]]
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 has no anticompetitive effect if it involves
depository institutions 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 institutions 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 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, was not in compliance with minimum
capital requirements, or otherwise was in a ``troubled condition''
[[Page 67433]]
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 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.
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 woman-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 26.6(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 institution
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 noted 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 institutions 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: November 27, 1998.
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 proposes
to revise 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, shares held by an individual include shares held by
members of his or her immediate family. ``Immediate family'' includes
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
[[Page 67434]]
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 with 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 city, town, or village, or 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 areas where the median
family income is less than 100 percent of the area median income.
(l) Management official. (1) The term management official includes:
(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.
(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 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
[[Page 67435]]
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 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 has no anticompetitive effect if it involves
depository institutions 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 institutions 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 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 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
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.
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 woman-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 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
[[Page 67436]]
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 noted 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 institutions 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: December 14, 1995.
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
proposes to revise 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
that section, shares held by an individual include shares held by
members of his or her immediate family. ``Immediate family'' includes
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 with 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 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.
[[Page 67437]]
(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 areas where the median
family income is less than 100 percent of the area median income.
(l) Management official. (1) The term management official includes:
(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 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. 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 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.
[[Page 67438]]
(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 has no anticompetitive effect if it involves
depository institutions 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 institutions 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 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, 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 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.
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 woman-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, 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 noted 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 institutions 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.
By order of the Board of Directors.
Dated at Washington, DC, this 12th day of December, 1995.
[[Page 67439]]
Federal Deposit Insurance Corporation.
Jerry L. Langley,
Executive Secretary.
Office of Thrift Supervision
12 CFR CHAPTER V
Authority and Issuance
For the reasons set out in the joint preamble, the OTS proposes to
revise 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, shares held by an individual include shares held by
members of his or her immediate family. ``Immediate family'' includes
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
with 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 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 areas where the median
family income is less than 100 percent of the area median income.
(l) Management official. (1) The term management official includes:
(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
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
[[Page 67440]]
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:
(i) Any Federal savings association (as defined in section 3(b)(2)
of the Federal Deposit Insurance Act (12 U.S.C. 1813(b)(2));
(ii) 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
(iii) 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 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 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:
[[Page 67441]]
(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 has no anticompetitive effect if it involves
depository institutions 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 institutions 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 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, 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 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.
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 woman-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 institution
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 noted 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
institutions 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
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: December 13, 1995.
Jonathan L. Fiechter,
Acting Director.
[FR Doc. 95-30972 Filed 12-28-95; 8:45 am]
BILLING CODES 4810-33-P, 6210-01-P, 6714-01-P, 6720-01-P
