[Federal Register Volume 63, Number 154 (Tuesday, August 11, 1998)]
[Proposed Rules]
[Pages 43052-43058]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-20848]



[[Page 43051]]

_______________________________________________________________________

Part VII

Department of the Treasury
Office of the Comptroller of the Currency



12 CFR Part 26

Federal Reserve Board



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. 63, No. 154 / Tuesday, August 11, 1998 / 
Proposed Rules

[[Page 43052]]



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.

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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) 
(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 <a href="/cdn-cgi/l/email-protection" class="__cf_email__" data-cfemail="bfedfaf8ec91fcf0f2f2faf1ebecfff0fcfc91ebedfafeec91f8f0e9">[email protected]</a>.
    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: 
<a href="/cdn-cgi/l/email-protection#0c6f6361616962787f4c6a68656f226b637a"><span class="__cf_email__" data-cfemail="ee8d8183838b809a9dae888a878dc0898198">[email protected]</span></a>). 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 hand-delivered 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 e-mail to: <a href="/cdn-cgi/l/email-protection#c7b7b2a5abaea4e9aea9a1a887a8b3b4e9b3b5a2a6b4e9a0a8b1"><span class="__cf_email__" data-cfemail="65151007090c064b0c0b030a250a11164b11170004164b020a13">[email protected]</span></a>. 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 <SUP>1</SUP> 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).
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    \1\ Each 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.
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    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

[[Page 43053]]

of the organizations.<SUP>2</SUP> 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.
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    \2\ The Agencies define ``total assets'' of diversified savings 
and loan holding companies and bank holding companies exempt from 
Sec. 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).
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    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), <SUP>3</SUP> and restored the Agencies' broad authority to 
create regulatory exemptions to the statutory prohibitions on 
interlocks.
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    \3\ The Agencies adopted final regulations implementing the 
management interlocks provisions of the CDRI Act, effective October 
1, 1996. See 61 FR 40293 (August 2, 1996).
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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.<SUP>4</SUP> With the repeal of the 
specific exemptive standards in the CDRI Act, two of these definitions 
have become unnecessary and would be removed.
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    \4\ See 61 FR 40293 (August 2, 1996).
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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 moderate-income 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.'' <SUP>5</SUP> 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.
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    \5\ See 44 FR 42161, 42165 (July 19, 1979).
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    With the EGRPR Act's restoration of the broad exemptive authority 
under the Interlocks Act, the Agencies again have

[[Page 43054]]

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 moderate-
income 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.<SUP>6</SUP> 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.<SUP>7</SUP> 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.
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    \6\ See OCC, 59 FR 29740 (June 9, 1994); Board, 59 FR 7909 
(February 17, 1994); and FDIC, 59 FR 18764 (April 20, 1994).
    \7\ See 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.
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    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

[[Page 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

[[Page 43056]]

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.


Sec. 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:


Sec. 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:


Sec. 26.5  Small market share exemption.

    (a) Exemption. A management interlock that is prohibited by 
Sec. 26.3 is permissible, if:
    (1) The interlock is not prohibited by Sec. 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:


Sec. 26.6  General exemption.

    (a) Exemption. The OCC may, by order issued following receipt of an 
application, exempt an interlock from the prohibitions in Sec. 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:


Sec. 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.


Sec. 212.2  [Amended]

    2. Section 212.2 is amended by removing paragraphs (b) and (f) and

[[Page 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:


Sec. 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:


Sec. 212.5  Small market share exemption.

    (a) Exemption. A management interlock that is prohibited by 
Sec. 212.3 is permissible, if:
    (1) The interlock is not prohibited by Sec. 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:


Sec. 212.6  General exemption.

    (a) Exemption. The Board may, by agency order, exempt an interlock 
from the prohibitions in Sec. 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:


Sec. 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.


Sec. 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:


Sec. 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:


Sec. 348.5  Small market share exemption.

    (a) Exemption. A management interlock that is prohibited by 
Sec. 348.3 is permissible, if:
    (1) The interlock is not prohibited by Sec. 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:


Sec. 348.6  General exemption.

    (a) Exemption. The FDIC may, by agency order, exempt an interlock 
from the prohibitions in Sec. 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

[[Page 43058]]

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 
Sec. 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:


Sec. 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.


Sec. 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:


Sec. 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:


Sec. 563f.5  Small market share exemption.

    (a) Exemption. A management interlock that is prohibited by 
Sec. 563f.3 is permissible, if:
    (1) The interlock is not prohibited by Sec. 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:


Sec. 563f.6  General exemption.

    (a) Exemption. The OTS may, by agency order, exempt an interlock 
from the prohibitions in Sec. 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 Sec. 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 
Sec. 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:


Sec. 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%);


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