43052 Federal Register / Vol. 63, No. 154 /Tuesday, August 11, 1998 / Proposed Rules

1Each of the Agencies’ regulations generally

define ‘‘office’’ as a home or branch office. See 12

CFR 26.2, 212.2, 348.2, and 563f.2.

DEPARTMENT OF THE TREASURY

Office of the Comptroller of the

Currency

12 CFR Part 26

[Docket No. 98–09]

RIN 1557–AB60

FEDERAL RESERVE BOARD

12 CFR Part 212

[Docket No. R–1013]

FEDERAL DEPOSIT INSURANCE

CORPORATION

12 CFR Part 348

RIN 3064–ACO8

DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Part 563f

[Docket No. 98–58]

RIN 1550–AB07

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.

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) (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

October 13, 1998.

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. 98–09.

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

REGS.COMMENTS@OCC.TREAS.GOV.

Board: Jennifer J. Johnson, Secretary,

Board of Governors of the Federal

Reserve System, Docket No. R–1013,

20th Street and Constitution Avenue,

NW., Washington, DC 20551. Comments

addressed to Ms. Johnson 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 12 CFR 261.12 of the

Board’s Rules Regarding Availability of

Information, 12 CFR 261.12.

FDIC: Written comments should be

addressed to Robert E. Feldman,

Executive Secretary, Attention:

Comments/OES, Federal Deposit

Insurance Corporation, 550 17th Street,

NW, Washington, DC 20429. Comments

may be hand delivered to the guard

station at the rear of the 550 17th Street

Building (located on F Street), on

business days between 7:00 a.m. and

5:00 p.m. (Fax number: (202) 898–3838;

Internet address: comments@fdic.gov).

Comments may be inspected and

photocopied in the FDIC Public

Information Center, Room 100, 801 17th

Street, NW, Washington, DC, between

9:00 a.m. and 4:30 p.m. on business

days.

OTS: Manager, Dissemination Branch,

Records Management and Information

Policy, Office of Thrift Supervision,

1700 G Street, NW., Washington, DC

20552, Attention Docket No. 98–58.

These submissions may be handdelivered to 1700 G Street, NW., from

9:00 to 5:00 on business days; sent by

facsimile transmission to FAX number

(202) 906–7755, or may be sent by email to: public.info@ots.treas.gov. Those

commenting by e-mail should include

their name and telephone number.

Comments will be available for

inspection at 1700 G Street, NW., from

9:00 until 4:00 on business days.

FOR FURTHER INFORMATION CONTACT:

OCC: Sue E. Auerbach, Senior Attorney,

Bank Activities and Structure, (202)

874–5300; Emily R. McNaughton,

National Bank Examiner, Senior Policy

Analyst, Core Policy Development, (202)

874–5190; Jackie Durham, Bank

Organization and Structure, Senior

Licensing Policy Analyst, (202) 874–

5060; or Ursula Pfeil, Attorney,

Legislative and Regulatory Activities,

(202) 874–5090.

Board: Thomas M. Corsi, Senior

Counsel, (202) 452–3275, or Michelle Q.

Profit, Attorney, (202) 736–5599, Legal

Division, Board of Governors of the

Federal Reserve System. For the hearing

impaired only, Telecommunication

Device for Deaf (TTD), Diane Jenkins,

(202) 452–3544.

FDIC: Curtis Vaughn, Examination

Specialist, Division of Supervision,

(202) 898–6759; John Jilovec,

Examination Specialist, Division of

Supervision, (202) 898–8958; or Mark

Mellon, Counsel, Regulation and

Legislation Section, Legal Division,

(202) 898–3854.

OTS: David Bristol, Senior Attorney,

Business Transactions Division, Chief

Counsel’s Office, (202) 906–6461; or

Joseph M. Casey, Supervision Policy,

(202) 906–5741.

SUPPLEMENTARY INFORMATION:

I. Background

The Depository Institution

Management Interlocks Act (12 U.S.C.

3201–3208) (the Interlocks Act or Act)

generally prohibits bank management

officials from serving simultaneously

with two unaffiliated depository

institutions or their holding companies

(depository organizations). The scope of

the prohibition depends on the size and

location of the organizations involved.

For instance, the Act prohibits

interlocks between unaffiliated

depository organizations, regardless of

size, if both organizations have an

office 1 in the same community (the

community prohibition). Interlocks are

also prohibited between unaffiliated

depository organizations if both

organizations have total assets of $20

million or more and have offices in the

same Relevant Metropolitan Statistical

Area (RMSA) (the RMSA prohibition).

The Interlocks Act also prohibits

interlocks between unaffiliated

depository organizations, regardless of

location, if the organizations have total

assets exceeding specified thresholds

(the major assets prohibition).

Section 2210 of the Economic Growth

and Regulatory Paperwork Reduction

Act of 1996 (EGRPR Act) amended

sections 204, 206 and 209 of the

Interlocks Act (12 U.S.C. 3203, 3205 and

3207). Section 2210(a) of the EGRPR Act

amended the Interlocks Act by changing

the thresholds for the major assets

prohibition under 12 U.S.C. 3203. Prior

to the EGRPR Act, management officials

of depository organizations with total

assets exceeding $1 billion were

prohibited from serving as management

officials of unaffiliated depository

organizations with assets exceeding

$500 million, regardless of the location
Federal Register / Vol. 63, No. 154 /Tuesday, August 11, 1998 / Proposed Rules 43053

2The Agencies define ‘‘total assets’’ of diversified

savings and loan holding companies and bank

holding companies exempt from § 4 of the Bank

Holding Company Act to include only the assets of

their depository institution affiliates. See 12 CFR

26.2(r), 212.2(q), 348.2(q), and 563f.2(r).

3The Agencies adopted final regulations

implementing the management interlocks

provisions of the CDRI Act, effective October 1,

1996. See 61 FR 40293 (August 2, 1996).

4See 61 FR 40293 (August 2, 1996). 5See 44 FR 42161, 42165 (July 19, 1979).

of the organizations.2 The EGRPR Act

raised the thresholds to $2.5 billion and

$1.5 billion, respectively. The revision

also authorized the Agencies to adjust

the thresholds by regulation, as

necessary to allow for inflation or

market conditions.

Section 2210(b) of the EGRPR Act

permanently extended the grandfather

exemptions found in 12 U.S.C. 3205(a)

and (b). These exemptions were due to

expire in 1998. The EGRPR Act repealed

section 3205(c), which mandated

Agency review of grandfathered

interlocks before March 1995.

The EGRPR Act also amended 12

U.S.C. 3207 to provide that the Agencies

may adopt ‘‘regulations that permit

service by a management official that

would otherwise be prohibited by [the

Interlocks Act], if such service would

not result in a monopoly or substantial

lessening of competition.’’ This change

repealed the specific ‘‘regulatory

standards’’ and ‘‘management

consignment’’ exemptions added by the

Riegle Community Development and

Regulatory Improvement Act of 1994

(CDRI Act), 3 and restored the Agencies’

broad authority to create regulatory

exemptions to the statutory prohibitions

on interlocks.

II. Discussion of Proposed Regulations

The proposal reflects these statutory

changes. This proposal also renews an

earlier proposal for a small market share

exemption that the Board, OCC, and

FDIC had advanced before enactment of

the CDRI Act. The Agencies invite

comments on all aspects of this

proposal.

A. Definitions

The Agencies’ current regulations

define key terms implementing the

Interlocks Act. A number of these

definitions were added or revised in

1996 to implement the CDRI Act.4 With

the repeal of the specific exemptive

standards in the CDRI Act, two of these

definitions have become unnecessary

and would be removed.

Anticompetitive Effect

The current rule defines

‘‘anticompetitive effect’’ as a ‘‘monopoly

or substantial lessening of competition.’’

Under the new statutory scheme, the

substance of this definition is the sole

criterion for gauging whether to grant an

exemption under the Agencies’ general

exemptive authority. Because the

proposed regulations would employ this

phrase in only one provision, a separate

definition is unnecessary.

Critical

The current regulations use the term

‘‘critical’’ in connection with the

Regulatory Standards exemption created

by the CDRI Act. Since the EGRPR Act

eliminates the Regulatory Standards

exemption, a regulatory definition of

‘‘critical’’ is unnecessary.

B. Major Assets Prohibition

Prior to the EGRPR Act, if a

depository institution or depository

holding company had total assets

exceeding $1 billion, a management

official of such institution or any

affiliate thereof could not serve as a

management official of any other

nonaffiliated depository institution or

depository holding company having

total assets exceeding $500 million or as

a management official of any affiliates of

such other institution, regardless of

location. The EGRPR Act revised the

asset thresholds for the major assets

prohibition from $1 billion and $500

million to $2.5 billion and $1.5 billion,

respectively. The legislation also

authorized the Agencies to adjust the

threshold from time to time to reflect

inflation or market changes.

The proposal would amend the

regulations to reflect the new threshold

amounts, and to add a mechanism

providing for periodic adjustments of

the thresholds. The adjustment would

be based on changes in the Consumer

Price Index for Urban Wage Earners and

Clerical Workers (the Consumer Price

Index). In those years when changes in

the Consumer Price Index would change

the thresholds by more than $100

million, the Agencies will provide

appropriate notice of the change to

depository institutions and depository

institution holding companies. The

Agencies invite comment on other types

of market changes that may warrant

subsequent adjustments to the major

assets prohibition.

C. Regulatory Standards and

Management Consignment Exemptions

The current regulations contain

Regulatory Standards and Management

Consignment exemptions, which were

predicated on section 3207 of the CDRI

Act. The EGRPR Act removed the

specific exemptions from the Interlocks

Act and substituted a general authority

for the Agencies to create exemptions by

regulation. Accordingly, the proposed

rule would remove these regulatory

exemptions.

However, the rule proposed under the

amended exemptive authority,

discussed in the following section,

includes rebuttable presumptions that

interlocks in certain circumstances

would not result in a monopoly or

substantial lessening of competition.

These presumptions are based on

criteria that the Agencies used before

the passage of the CDRI Act, and which

Congress employed in creating the

Management Consignment exemption.

D. General Exemptive Authority

Section 2210(c) of the EGRPR Act

authorizes the Agencies to adopt

regulations permitting service by a

management official that would

otherwise be prohibited by the

Interlocks Act, if such service would not

result in ‘‘a monopoly or substantial

lessening of competition.’’ To

implement this authority, the Agencies

are proposing to exempt otherwise

prohibited management interlocks

where the dual service would not result

in a monopoly or substantial lessening

of competition, and would not

otherwise threaten safety and

soundness. The process for obtaining

such exemptions will be set out in each

Agency’s procedural regulations or, in

the case of the OCC, in its Corporate

Manual.

Since 1979, when regulations

implementing the Interlocks Act were

first promulgated, the Agencies have

recognized that interlocks involving

certain classes of depository

organizations present a reduced risk to

competition, and that, by enlarging the

pool of management available to such

organizations, competition could be

enhanced. Thus, in the initial interlocks

rules published in 1979, the Agencies

reserved the authority to permit

interlocks to strengthen newly chartered

organizations, troubled organizations,

organizations in low- or moderateincome areas, and organizations

controlled or managed by minorities or

women. The authority to permit

interlocks in such circumstances was

deemed ‘‘necessary for the promotion of

competition over the long term.’’ 5 Prior

to the CDRI Act, these exemptions were

granted to meet the need for qualified

management. The Management

Consignment exemption under the CDRI

Act was generally available to the same

four classes of organizations, but on a

more limited basis.

With the EGRPR Act’s restoration of

the broad exemptive authority under the

Interlocks Act, the Agencies again have
43054 Federal Register / Vol. 63, No. 154 /Tuesday, August 11, 1998 / Proposed Rules

6See OCC, 59 FR 29740 (June 9, 1994); Board, 59

FR 7909 (February 17, 1994); and FDIC, 59 FR

18764 (April 20, 1994).

7See 60 FR 67424 (December 29, 1995) for

withdrawal by the OCC and the Board; and 60 FR

7139 (February 7, 1995) for withdrawal by the FDIC.

broad authority to grant exemptions that

will not adversely affect competition.

The Agencies believe that interlocks

involving the four classes of

organizations previously identified may

provide management expertise needed

to enhance such organizations’ ability to

compete. Accordingly, the Agencies

propose to create a rebuttable

presumption that an interlock would

not result in a monopoly or substantial

lessening of competition, if: (1) The

depository organization primarily

serves, low- or moderate-income areas;

(2) the depository organization is

controlled or managed by members of a

minority group or women; (3) the

depository institution has been

chartered for less than 2 years; or (4) the

depository organization is deemed to be

in ‘‘troubled condition’’ under

regulations implementing section 914 of

the Financial Institutions Reform,

Recovery, and Enforcement Act of 1989

(12 U.S.C. 1831i). These presumptions

would be applied in a manner

consistent with the Agencies’ past

analysis of the factors to meet the

legitimate needs of the institutions and

organizations involved for qualified and

skilled management.

The presumptions are designed to

provide greater flexibility to classes of

organizations that may have greater

need for seasoned management. A claim

that factors exist giving rise to a

presumption does not preclude an

Agency from denying a request for an

exemption if the Agency finds that the

interlock nevertheless would result in a

monopoly or substantial lessening of

competition.

The definitions of ‘‘area median

income’’ and ‘‘low- and moderateincome areas’’ added to the regulations

in 1996 to implement the CDRI Act

amendments would be retained to

provide guidance as to when an

organization would qualify for one of

the presumptions.

Interlocks that are based on a

rebuttable presumption would be

allowed to continue for three years,

unless otherwise provided in the

approval order. Nothing in the proposed

rule would prevent an organization from

applying for an extension of an interlock

exemption granted under a presumption

if the factors continued to apply. The

organization would also be free to

utilize any other exemption that may be

available. The Agencies propose that

any interlock approved under this

section may continue so long as it

would not result in a monopoly or

substantial lessening of competition,

becomes unsafe or unsound, or is

subject to a condition requiring

termination at a specific time.

E. Small Market Share Exemption

In 1994, the OCC, Board, and FDIC

published notices of proposed

rulemaking seeking comment on a

proposed market share exemption.6 The

proposed exemption would have been

available 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 CDRI Act. After the CDRI Act

restricted the agencies’ broad authority,

the OCC, Board and FDIC withdrew

their proposals.7 The broad exemptive

authority under the EGRPR Act provides

authority for a small market share

exemption. Accordingly, the OCC,

Board and FDIC, joined by the OTS, are

issuing this proposal for the small

market share exemption.

The exemption is intended to enlarge

the pool of management talent upon

which depository institutions may

draw, resulting in more competitive,

better-managed institutions without

causing significant anticompetitive

effects. The Interlocks Act, by

discouraging common management

among financial institutions, seeks to

prevent adverse effects on competition

in the provision of products and

services that financial institutions offer.

Where depository institutions dominate

a large portion of the market, these risks

are significant. When a particular

market is served by many institutions,

however, the risks diminish that

depository institutions with interlocking

relationships can adversely affect the

available products and services in their

markets.

The Agencies believe that the

combined share of the deposits of two

institutions provides a meaningful

assessment of the capacity of the two

institutions to control credit and related

services in their market. Accordingly,

the Agencies propose to exempt

interlocking service involving two

unaffiliated depository organizations

that together control no more than 20

percent of the deposits in any RMSA or

community in which the organizations

have offices. Organizations claiming the

exemption would be required to

determine the market share in each

RMSA and community in which both

depository organizations (or their

depository institution affiliates) have

offices.

The relevant market used for the

small market share exception (i.e. the

RMSAs or communities in which both

depository organizations or their

depository institution affiliates have

offices) are the same markets described

in the community and RMSA

prohibitions. The small market share

exemption would not be available for

interlocks subject to the major assets

prohibition.

The exemptions would continue to

apply as long as the organizations meet

the applicable conditions. Any event,

such as expansion or a merger, that

causes the level of deposits controlled to

exceed 20 percent of deposits in any

RMSA or community would be

considered to be a change in

circumstances. Accordingly, the

depository organizations would have 15

months (or such shorter period as

directed by the appropriate Agency) to

address the prohibited interlock by

termination or otherwise. Conforming

changes relating to termination have

been made to the Agencies’ change of

circumstances provisions.

No prior Agency approval would be

required in order to claim the proposed

small market share exemption.

Management is responsible for

compliance with the terms of the

exemption and for maintaining

sufficient supporting documentation. To

determine their eligibility for the

exemptions, depository organizations

would need to obtain appropriate

deposit share data from the FDIC. This

information is collected in the Summary

of Deposits published by the FDIC and

is available for institutions regulated by

the Agencies on the Internet at http://

www.fdic.gov.

The most recently available deposit

share data will be used to determine

whether organizations are entitled to the

exemptions. Thus, the depository

organization seeking the exemption is

entitled to rely upon the deposit share

data that has been compiled for the

previous year, until the next year’s data

has been distributed.

The Agencies request comments on

all aspects of the proposed small market

share exemption. In particular, the

Agencies request comments regarding

the following issues:

1. Whether 20 percent of the deposits

in a community or RMSA is an

appropriate limit for the application of

the exemptions.

2. Whether deposit data collected by

the FDIC in connection with the Report

of Condition and Income should be used

to determine eligibility for the

exemptions, and whether alternative
Federal Register / Vol. 63, No. 154 /Tuesday, August 11, 1998 / Proposed Rules 43055

sources of information concerning

deposit share should be acceptable for

determining availability of the

exemptions.

3. Whether calculation of a depository

organization’s eligibility for exemption

from the community prohibition will

create undue burdens, and, if so, how

the burdens could be reduced (for

example, by basing the exemption on

the total asset size of the institutions

involved).

4. Whether there is a significant risk

that the purposes of the Interlocks Act

would be evaded through ‘‘hub and

spoke’’ arrangements. Under these

arrangements, directors of one

depository organization would serve as

directors of different unaffiliated

organizations that have, in the aggregate,

a deposit share in excess of the 20%

limit.

III. Paperwork Reduction Act

The Agencies 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;

(4) Ways to minimize the burden of

the information collection on

respondents, including the use of

automated collection techniques or

other forms of information technology;

and

(5) Estimates of capital or start-up

costs and costs of operation, minutes,

and purchase of services to provide

information.

Recordkeepers 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), 26.6(b),

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: 4 hours.

Estimated number of respondents: 7.

Estimated total annual reporting

burden: 29 hours.

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, Chief,

Financial Reports Section, 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

212.4(h)(1)(i), 212.6(b), 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.

Estimated number of respondents: 6

applicants per year.

Estimated average annual burden per

respondent: 4 hours.

Estimated annual frequency of

reporting: Not applicable (one-time

application).

Estimated total annual reporting

burden: 24 hours.

Start-up costs to respondents: None.

No issues of confidentiality under the

provisions of the Freedom of

Information Act normally arise for the

applications.

FDIC: The collections of information

contained in this 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

(3604–0118), Washington, DC 20503,

with copies of such comments to be sent

to Steven F. Hanft, Office of the

Executive Secretary, 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), 348.6(b), and 348.6(c).

This information is required to evidence

compliance with the requirements of the

Interlocks Act. The likely respondents

are insured nonmember banks.

Estimated number of respondents: 5

applicants per year.

Estimated average annual burden per

respondent: 4 hours.

Estimated annual frequency of

reporting: Not applicable (one-time

application).

Estimated total annual reporting

burden: 20 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

(1550–0051), Washington, DC 20503,

with copies to the Office of Thrift

Supervision, 1700 G Street, NW.,

Washington, DC.

The information collection

requirements in this proposed rule are

found in 12 CFR 563f.4(h)(1)(i),

563f.6(b) and 563f.6(c). The OTS

requires this information as evidence of

compliance with the requirements of the

Interlocks Act by savings associations.

The likely respondents are savings

associations.

Estimated annual frequency of

reporting: Not applicable (one-time

application).

Estimated total annual reporting

burden: 32 hours.

Estimated average annual hours per

respondent: 4 hours.

Estimated number of respondents: 8.

Start-up costs to respondents: None.

IV. Regulatory Flexibility Act

Pursuant to section 605(b) of the

Regulatory Flexibility Act (RFA) (5

U.S.C. 605(b)) 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.

The proposed regulations relax the

criteria for obtaining an exemption from

the interlocks prohibitions, and

specifically address the needs of small
43056 Federal Register / Vol. 63, No. 154 /Tuesday, August 11, 1998 / Proposed Rules

entities by creating the small market

share exemption. Accordingly, a

regulatory flexibility analysis is not

required.

V. Executive Order 12866

The OCC and OTS have determined

that this proposal is not a significant

regulatory action under Executive Order

12866.

VI. Unfunded Mandates Act of 1995

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, Holding companies,

Management official interlocks,

National banks, Reporting and

recordkeeping requirements.

12 CFR Part 212

Antitrust, Banks, banking, Federal

Reserve System, Holding companies,

Management official interlocks,

Reporting and recordkeeping

requirements.

12 CFR Part 348

Antitrust, Banks, banking, Holding

companies, Reporting and

recordkeeping requirements.

12 CFR Part 563f

Antitrust, Holding companies,

Reporting and recordkeeping

requirements, 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 amend

chapter I of title 12 of the Code of

Federal Regulations as follows:

PART 26—MANAGEMENT OFFICIAL

INTERLOCKS

1. The authority citation for part 26

continues to read as follows:

Authority: 12 U.S.C. 93a and 3201–3208.

§ 26.2 [Amended]

2. Section 26.2 is amended by

removing paragraphs (b) and (f) and

redesignating paragraphs (c) through (s)

as paragraphs (b) through (q),

respectively.

3. Section 26.3 is amended by revising

paragraph (c) to read as follows:

§ 26.3 Prohibitions.

* * * * *

(c) Major assets. A management

official of a depository organization

with total assets exceeding $2.5 billion

(or any affiliate of such an organization)

may not serve at the same time as a

management official of an unaffiliated

depository organization with total assets

exceeding $1.5 billion (or any affiliate of

such an organization), regardless of the

location of the two depository

organizations. The OCC will adjust

these thresholds, as necessary, based on

the year-to-year change in the average of

the Consumer Price Index for the Urban

Wage Earners and Clerical Workers, not

seasonally adjusted, with rounding to

the nearest $100 million.

4. Section 26.5 is revised to read as

follows:

§ 26.5 Small market share exemption.

(a) Exemption. A management

interlock that is prohibited by § 26.3 is

permissible, if:

(1) The interlock is not prohibited by

§ 26.3(c); and

(2) The depository organizations (and

their depository institution affiliates)

hold, in the aggregate, no more than 20

percent of the deposits in each RMSA or

community in which both depository

organizations (or their depository

institution affiliates) have offices. The

amount of deposits shall be determined

by reference to the most recent annual

Summary of Deposits published by the

FDIC for the RMSA or community.

(b) Confirmation and records. Each

depository organization must maintain

records sufficient to support its

determination of eligibility for the

exemption under paragraph (a) of this

section, and must reconfirm that

determination on an annual basis.

5. Section 26.6 is revised to read as

follows:

§ 26.6 General exemption.

(a) Exemption. The OCC may, by

order issued following receipt of an

application, exempt an interlock from

the prohibitions in § 26.3, if the OCC

finds that the interlock would not result

in a monopoly or substantial lessening

of competition, and would not present

safety and soundness concerns.

(b) Presumptions. In reviewing

applications for an exemption under

this section, the OCC will apply a

rebuttable presumption that an interlock

will not result in a monopoly or

substantial lessening of competition if

the depository organization seeking to

add a management official:

(1) Primarily serves low- and

moderate-income areas;

(2) Is controlled or managed by

persons who are members of a minority

group, or women;

(3) Is a depository institution that has

been chartered for less than two years;

or

(4) Is deemed to be in ‘‘troubled

condition’’ as defined in 12 CFR

5.51(c)(6).

(c) Duration. Unless a specific

expiration period is provided in the

OCC approval, an exemption permitted

by paragraph (a) of this section may

continue so long as it would not result

in a monopoly or substantial lessening

of competition, or be unsafe or unsound.

If the OCC grants an interlock

exemption in reliance upon a

presumption under paragraph (b) of this

section, the interlock may continue for

three years, unless otherwise provided

by the OCC in writing.

6. Section 26.7 is amended by revising

paragraph (a) to read as follows:

§ 26.7 Change in circumstances.

(a) Termination. A management

official shall terminate his or her service

or apply for an exemption if a change

in circumstances causes the service to

become prohibited. A change in

circumstances may include an increase

in asset size of an organization, a change

in the delineation of the RMSA or

community, the establishment of an

office, an increase in the aggregate

deposits of the depository organization,

or an acquisition, merger, consolidation,

or any reorganization of the ownership

structure of a depository organization

that causes a previously permissible

interlock to become prohibited.

* * * * *

Dated: July 14, 1998.

Julie L. Williams,

Acting Comptroller of the Currency.

Federal Reserve System

12 CFR Chapter II

Authority and Issuance

For the reasons set out in the joint

preamble, the Board proposes to amend

chapter II of title 12 of the Code of

Federal Regulations as follows:

PART 212—MANAGEMENT OFFICIAL

INTERLOCKS

1. The authority citation for part 212

continues to read as follows:

Authority: 12 U.S.C. 3201–3208; 15 U.S.C.

19.

§ 212.2 [Amended]

2. Section 212.2 is amended by

removing paragraphs (b) and (f) and
Federal Register / Vol. 63, No. 154 /Tuesday, August 11, 1998 / Proposed Rules 43057

redesignating paragraphs (c) through (r)

as paragraphs (b) through (p),

respectively.

3. Section 212.3 is amended by

revising paragraph (c) to read as follows:

§ 212.3 Prohibitions.

* * * * *

(c) Major assets. A management

official of a depository organization

with total assets exceeding $2.5 billion

(or any affiliate of such an organization)

may not serve at the same time as a

management official of an unaffiliated

depository organization with total assets

exceeding $1.5 billion (or any affiliate of

such an organization), regardless of the

location of the two depository

organizations. The Board will adjust

these thresholds, as necessary, based on

the year-to-year change in the average of

the Consumer Price Index for the Urban

Wage Earners and Clerical Workers, not

seasonally adjusted, with rounding to

the nearest $100 million.

4. Section 212.5 is revised to read as

follows:

§ 212.5 Small market share exemption.

(a) Exemption. A management

interlock that is prohibited by § 212.3 is

permissible, if:

(1) The interlock is not prohibited by

§ 212.3(c); and

(2) The depository organizations (and

their depository institution affiliates)

hold, in the aggregate, no more than 20

percent of the deposits in each RMSA or

community in which both depository

organizations (or their depository

institution affiliates) have offices. The

amount of deposits shall be determined

by reference to the most recent annual

Summary of Deposits published by the

FDIC for the RMSA or community.

(b) Confirmation and records. Each

depository organization must maintain

records sufficient to support its

determination of eligibility for the

exemption under paragraph (a) of this

section, and must reconfirm that

determination on an annual basis.

5. Section 212.6 is revised to read as

follows:

§ 212.6 General exemption.

(a) Exemption. The Board may, by

agency order, exempt an interlock from

the prohibitions in § 212.3, if the Board

finds that the interlock would not result

in a monopoly or substantial lessening

of competition, and would not present

safety and soundness concerns.

(b) Presumptions. In reviewing

applications for an exemption under

this section, the Board will apply a

rebuttable presumption that an interlock

will not result in a monopoly or

substantial lessening of competition if

the depository organization seeking to

add a management official:

(1) Primarily serves low- and

moderate-income areas;

(2) Is controlled or managed by

persons who are members of a minority

group, or women;

(3) Is a depository institution that has

been chartered for less than two years;

or

(4) Is deemed to be in ‘‘troubled

condition’’ as defined in 12 CFR 225.71.

(c) Duration. Unless a shorter

expiration period is provided in the

Board approval, an exemption permitted

by paragraph (a) of this section may

continue so long as it would not result

in a monopoly or substantial lessening

of competition, or be unsafe or unsound.

If the Board grants an interlock

exemption in reliance upon a

presumption under paragraph (b) of this

section, the interlock may continue for

three years, unless otherwise provided

by the Board in writing.

6. Section 212.7 is amended by

revising paragraph (a) to read as follows:

§ 212.7 Change in circumstances.

(a) Termination. A management

official shall terminate his or her service

or apply for an exemption if a change

in circumstances causes the service to

become prohibited. A change in

circumstances may include an increase

in asset size of an organization, a change

in the delineation of the RMSA or

community, the establishment of an

office, an increase in the aggregate

deposits of the depository organization,

or an acquisition, merger, consolidation,

or reorganization of the ownership

structure of a depository organization

that causes a previously permissible

interlock to become prohibited.

* * * * *

By order of the Board of Governors of the

Federal Reserve System, July 20, 1998.

Jennifer J. Johnson,

Secretary of the Board.

Federal Deposit Insurance Corporation

12 CFR Chapter III

Authority and Issuance

For the reasons set forth in the joint

preamble, the Board of Directors of the

FDIC proposes to amend chapter III of

title 12 of the Code of Federal

Regulations as follows:

PART 348—MANAGEMENT OFFICIAL

INTERLOCKS

1. The authority citation for part 348

is revised to read as follows:

Authority: 12 U.S.C. 1823(k), 3207.

§ 348.2 [Amended]

2. Section 348.2 is amended by

removing paragraphs (b) and (f) and

redesignating paragraphs (c) through (r)

as paragraphs (b) through (p),

respectively.

3. Section 348.3 is amended by

revising paragraph (c) to read as follows:

§ 348.3 Prohibitions.

* * * * *

(c) Major assets. A management

official of a depository organization

with total assets exceeding $2.5 billion

(or any affiliate of such an organization)

may not serve at the same time as a

management official of an unaffiliated

depository organization with total assets

exceeding $1.5 billion (or any affiliate of

such an organization), regardless of the

location of the two depository

organizations. The FDIC will adjust

these thresholds, as necessary, based on

the year-to-year change in the average of

the Consumer Price Index for the Urban

Wage Earners and Clerical Workers, not

seasonally adjusted, with rounding to

the nearest $100 million.

4. Section 348.5 is revised to read as

follows:

§ 348.5 Small market share exemption.

(a) Exemption. A management

interlock that is prohibited by § 348.3 is

permissible, if:

(1) The interlock is not prohibited by

§ 348.3(c); and

(2) The depository organizations (and

their depository institution affiliates)

hold, in the aggregate, no more than 20

percent of the deposits in each RMSA or

community in which both depository

organizations (or their depository

institution affiliates) have offices. The

amount of deposits shall be determined

by reference to the most recent annual

Summary of Deposits published by the

FDIC for the RMSA or community.

(b) Confirmation and records. Each

depository organization must maintain

records sufficient to support its

determination of eligibility for the

exemption under paragraph (a) of this

section, and must reconfirm that

determination on an annual basis.

5. Section 348.6 is revised to read as

follows:

§ 348.6 General exemption.

(a) Exemption. The FDIC may, by

agency order, exempt an interlock from

the prohibitions in § 348.3, if the FDIC

finds that the interlock would not result

in a monopoly or substantial lessening

of competition, and would not present

safety and soundness concerns.

(b) Presumptions. In reviewing

applications for an exemption under

this section, the FDIC will apply a
43058 Federal Register / Vol. 63, No. 154 /Tuesday, August 11, 1998 / Proposed Rules

rebuttable presumption that an interlock

will not result in a monopoly or

substantial lessening of competition if

the depository organization seeking to

add a management official:

(1) Primarily serves low- and

moderate-income areas;

(2) Is controlled or managed by

persons who are members of a minority

group, or women;

(3) Is a depository institution that has

been chartered for less than two years;

or

(4) Is deemed to be in ‘‘troubled

condition’’ as defined in § 303.101(c) of

this chapter.

(c) Duration. Unless a shorter

expiration period is provided in the

FDIC approval, an exemption permitted

by paragraph (a) of this section may

continue so long as it would not result

in a monopoly or substantial lessening

of competition, or be unsafe or unsound.

If the FDIC grants an interlock

exemption in reliance upon a

presumption under paragraph (b) of this

section, the interlock may continue for

three years, unless otherwise provided

by the FDIC in writing.

6. Section 348.7 is amended by

revising paragraph (a) to read as follows:

§ 348.7 Change in circumstances.

(a) Termination. A management

official shall terminate his or her service

or apply for an exemption if a change

in circumstances causes the service to

become prohibited. A change in

circumstances may include an increase

in asset size of an organization, a change

in the delineation of the RMSA or

community, the establishment of an

office, an increase in the aggregate

deposits of the depository organization,

or an acquisition, merger, consolidation,

or reorganization of the ownership

structure of a depository organization

that causes a previously permissible

interlock to become prohibited.

* * * * *

By order of the Board of Directors.

Dated at Washington, DC, this 18th day of

May, 1998.

Federal Deposit Insurance Corporation.

Robert E. Feldman,

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 amend

chapter V of title 12 of the Code of

Federal Regulations as follows:

PART 563f—MANAGEMENT OFFICIAL

INTERLOCKS

1. The authority citation for part 563f

continues to read as follows:

Authority: 12 U.S.C. 3201–3208.

§ 563f.2 [Amended]

2. Section 563f.2 is amended by

removing paragraphs (b) and (f) and

redesignating paragraphs (c) through (s)

as paragraphs (b) through (q),

respectively.

3. Section 563f.3 is amended by

revising paragraph (c) to read as follows:

§ 563f.3 Prohibitions.

* * * * *

(c) Major assets. A management

official of a depository organization

with total assets exceeding $2.5 billion

(or any affiliate of such an organization)

may not serve at the same time as a

management official of an unaffiliated

depository organization with total assets

exceeding $1.5 billion (or any affiliate of

such an organization), regardless of the

location of the two depository

organizations. The OTS will adjust these

thresholds, as necessary, based on the

year-to-year change in the average of the

Consumer Price Index for the Urban

Wage Earners and Clerical Workers, not

seasonally adjusted, with rounding to

the nearest $100 million.

4. Section 563f.5 is revised to read as

follows:

§ 563f.5 Small market share exemption.

(a) Exemption. A management

interlock that is prohibited by § 563f.3 is

permissible, if:

(1) The interlock is not prohibited by

§ 563f.3(c); and

(2) The depository organizations (and

their depository institution affiliates)

hold, in the aggregate, no more than 20

percent of the deposits in each RMSA or

community in which both depository

organizations (or their depository

institution affiliates) have offices. The

amount of deposits shall be determined

by reference to the most recent annual

Summary of Deposits published by the

FDIC for the RMSA or community.

(b) Confirmation and records. Each

depository organization must maintain

records sufficient to support its

determination of eligibility for the

exemption under paragraph (a) of this

section, and must reconfirm that

determination on an annual basis.

5. Section 563f.6 is revised to read as

follows:

§ 563f.6 General exemption.

(a) Exemption. The OTS may, by

agency order, exempt an interlock from

the prohibitions in § 563f.3, if the OTS

finds that the interlock would not result

in a monopoly or substantial lessening

of competition, and would not present

safety and soundness concerns. A

depository organization may apply to

the OTS for an exemption as provided

by § 516.2 of this chapter.

(b) Presumptions. In reviewing

applications for an exemption under

this section, the OTS will apply a

rebuttable presumption that an interlock

will not result in a monopoly or

substantial lessening of competition if

the depository organization seeking to

add a management official:

(1) Primarily serves low-and

moderate-income areas;

(2) Is controlled or managed by

persons who are members of a minority

group, or women;

(3) Is a depository institution that or

has been chartered for less than two

years; or

(4) Is deemed to be in ‘‘troubled

condition’’ as defined in § 574.9(a)(5) of

this chapter.

(c) Duration. Unless a shorter

expiration period is provided in the

OTS approval, an exemption permitted

by paragraph (a) of this section may

continue so long as it would not result

in a monopoly or substantial lessening

of competition, or be unsafe or unsound.

If the OTS grants an interlock

exemption in reliance upon a

presumption under paragraph (b) of this

section, the interlock may continue for

three years, unless otherwise provided

by the OTS in writing.

6. Section 563f.7 is amended by

revising paragraph (a) to read as follows:

§ 563f.7 Change in circumstances.

(a) Termination. A management

official shall terminate his or her service

or apply for an exemption if a change

in circumstances causes the service to

become prohibited. A change in

circumstances may include an increase

in asset size of an organization, a change

in the delineation of the RMSA or

community, the establishment of an

office, an increase in the aggregate

deposits of the depository organization,

or an acquisition, merger, consolidation,

or reorganization of the ownership

structure of a depository organization

that causes a previously permissible

interlock to become prohibited.

* * * * *

By the Office of Thrift Supervision.

Dated: May 27, 1998.

Ellen Seidman,

Director.

[FR Doc. 98–20848 Filed 8–10–98; 8:45 am]

BILLING CODE OTS: 6720–01–P (25%); OCC: 4810–33–P

(25%); Board: 6210–01–P (25%) FDIC: 6714–01–P (25%);