67424 Federal Register / Vol. 60, No. 250 / Friday, December 29, 1995 / Proposed Rules

1The National Credit Union Administration has

participated in the interagency effort to revise the

management interlocks regulations and intends to

publish a separate Notice of Proposed Rulemaking

revising 12 CFR part 711 in the near future.

2The agencies completed their review of requests

for extensions by March 23, 1995, as directed by the

statute. Therefore, the provision regarding

extending the grandfather period is moot for

purposes of this regulation.

DEPARTMENT OF THE TREASURY

Office of the Comptroller of the

Currency

12 CFR Part 26

[Docket No. 95–31]

RIN 1557–AB39

FEDERAL RESERVE BOARD

12 CFR Part 212

[Docket No. R–0907]

FEDERAL DEPOSIT INSURANCE

CORPORATION

12 CFR Part 348

RIN 3064–AB71

DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Part 563f

[Docket No. 95–204]

RIN 1150–AA95

Management Official Interlocks

AGENCIES: Office of the Comptroller of

the Currency, Treasury; Board of

Governors of the Federal Reserve

System; Federal Deposit Insurance

Corporation; Office of Thrift

Supervision, Treasury.

ACTION: Joint notice of proposed

rulemaking.

SUMMARY: The Office of the Comptroller

of the Currency (OCC), Board of

Governors of the Federal Reserve

System (Board), Federal Deposit

Insurance Corporation (FDIC), and

Office of Thrift Supervision (OTS)

(collectively, the agencies) propose to

revise their rules regarding management

interlocks. The proposal conforms the

interlocks rules to recent statutory

changes, modernizes and clarifies the

rules, and reduces unnecessary

regulatory burdens where feasible,

consistent with statutory requirements.

DATES: Comments must be received by

February 27, 1996.

ADDRESSES: Comments should be

directed to:

OCC: Office of the Comptroller of the

Currency, Communications Division,

250 E Street, SW, Washington, DC

20219, Attention: Docket No. 95–31.

Comments will be available for public

inspection and photocopying at the

same location. In addition, comments

may be sent by facsimile transmission to

FAX number (202) 874–5274 or by

internet mail to

REG.COMMENTS@OCC.TREAS.GOV.

Board: William W. Wiles, Secretary,

Board of Governors of the Federal

Reserve System, Docket No. R–0907,

20th Street and Constitution Avenue,

NW, Washington, DC 20551. Comments

addressed to Mr. Wiles may also be

delivered to the Board’s mail room

between 8:45 a.m. and 5:15 p.m., and to

the security control room outside of

those hours. Both the mail room and

control room are accessible from the

courtyard entrance on 20th Street

between Constitution Avenue and C

Street, NW. Comments may be

inspected in room MP–500 between

9:00 a.m. and 5:00 p.m., except as

provided in § 261.8 of the Board’s Rules

Regarding Availability of Information,

12 CFR 261.8.

FDIC: Jerry L. Langley, Executive

Secretary, Attention: Room F–402,

Federal Deposit Insurance Corporation,

550 17th Street, NW, Washington, DC

20429. Comments may be delivered to

room F–400, 1776 F Street, NW,

Washington, DC 20429, on business

days between 8:30 a.m. and 5:00 p.m. or

sent by facsimile transmission to FAX

number 202/898–3838. Internet:

COMMENTS@FDIC.GOV. Comments

will be available for inspection and

photocopying in room 7118, 550 17th

Street, NW, Washington, DC 20429,

between 8:30 a.m. and 5:00 p.m. on

business days.

OTS: Chief, Dissemination Branch,

Records Management and Information

Policy, Office of Thrift Supervision,

1700 G Street, NW, Washington, DC

20552, Attention Docket No. 95–204.

These submissions may be hand

delivered to 1700 G Street, NW, from

9:00 A.M. to 5:00 P.M. on business days;

they may be sent by facsimile

transmission to FAX number (202) 906–

7755. Comments over 25 pages in length

should be sent to FAX number (202)

906–6956. Comments will be available

for inspection at 1700 G Street, NW,

from 9:00 A.M. until 4:00 P.M. on

business days.

FOR FURTHER INFORMATION CONTACT:

OCC: Sue E. Auerbach, Senior

Attorney, Bank Activities and Structure

Division (202) 874–5300; Emily R.

McNaughton, National Bank Examiner,

Credit & Management Policy (202) 874–

5170; Jackie Durham, Senior Licensing

Policy Analyst (202) 874–5060; or Mark

J. Tenhundfeld, Senior Attorney,

Legislative and Regulatory Activities

(202) 874–5090.

Board: Thomas M. Corsi, Senior

Attorney (202/452–3275), or Tina Woo,

Attorney (202/452–3890), Legal

Division, Board of Governors of the

Federal Reserve System. For the hearing

impaired only, Telecommunication

Device for Deaf (TTD), Dorothea

Thompson (202/452–3544), Board of

Governors of the Federal Reserve

System, 20th and C Streets, NW,

Washington DC 20551.

FDIC: Curtis Vaughn, Examination

Specialist, Division of Supervision,

(202) 898–6759; or Mark Mellon,

Counsel, Regulation and Legislation

Section, Legal Division, (202) 898–3854,

Federal Deposit Insurance Corporation,

550 17th Street, NW., Washington, DC

20429.

OTS: David Bristol, Senior Attorney,

Business Transactions Division, (202)

906–6461; or Donna Miller, Program

Manager, Supervision Policy, (202) 906–

7488.

SUPPLEMENTARY INFORMATION:

Background

Section 303 of the Riegle Community

Development and Regulatory

Improvement Act of 1994 (CDRI Act)

Section 303(a) of the CDRI Act (12

U.S.C. 4803(a)) requires the OCC, OTS,

Board, and FDIC to review their

regulations in order to streamline and

modify the regulations to improve

efficiency, reduce unnecessary costs,

and eliminate unwarranted constraints

on credit availability. Section 303(a)

also requires the agencies to work

jointly to make uniform all regulations

and guidelines implementing common

statutory or supervisory policies. The

agencies have reviewed their respective

management interlocks regulation with

these purposes in mind and, as is

explained in greater detail in the text

that follows, propose to amend the

regulations in ways designed to meet

the goals of section 303(a).1

Summary of Statutory Changes

The CDRI Act amended the

Depository Institution Management

Interlocks Act (12 U.S.C. 3201–3208)

(Interlocks Act) by removing the

agencies’ broad authority to exempt

otherwise impermissible interlocks and

replacing it with the authority to exempt

interlocks under more narrow

circumstances. The CDRI Act also

required a depository organization with

a ‘‘grandfathered’’ interlock to apply for

an extension of the grandfather period if

the organization wanted to keep the

interlock in place.2
Federal Register / Vol. 60, No. 250 / Friday, December 29, 1995 / Proposed Rules 67425

After the changes made by the CDRI

Act, a person subject to the Interlocks

Act’s restrictions seeking an exemption

from those restrictions must qualify

either for a ‘‘regulatory standards’’

exemption (the Regulatory Standards

exemption) or an exemption under a

‘‘management official consignment

program’’ (the Management

Consignment exemption). An applicant

seeking a Regulatory Standards

exemption must submit a board

resolution certifying that no other

candidate from the relevant community

has the necessary expertise to serve as

a management official, is willing to

serve, and is not otherwise prohibited

by the Interlocks Act from serving.

Before granting the exemption request,

the appropriate agency must find that

the individual is critical to the

institution’s safe and sound operations,

that the interlock will not produce an

anticompetitive effect, and that the

management official meets any

additional requirements imposed by the

agency. Under the Management

Consignment exemption, the

appropriate agency may permit an

interlock that otherwise would be

prohibited by the Interlocks Act if the

agency determines that the interlock

would improve the provision of credit

to low- and moderate-income areas,

increase the competitive position of a

minority- or woman-owned institution,

or strengthen the management of a

newly chartered institution or an

institution that is in an unsafe or

unsound condition. (See text following

‘‘Management Consignment exemption’’

in this Preamble for a discussion

regarding interlocks involving newly

chartered institutions or institutions

that are in an unsafe or unsound

condition.)

The proposal reflects these statutory

changes, and streamlines and clarifies

the interlocks regulations in various

respects. These changes are discussed in

the text that follows. The agencies invite

comments on all aspects of this

proposal.

Discussion

The following is a section-by-section

discussion of the proposed revisions.

Authority, Purpose, and Scope

This section in the agencies’ current

regulations identifies the Interlocks Act

as the statutory authority for the

management interlocks regulation. It

also states that the purpose of the rules

governing management interlocks is to

foster competition between unaffiliated

institutions. Finally, this section

currently identifies the types of

institutions to which each agency’s

regulation applies.

The proposed rule restates these

provisions and, in the OCC proposed

rule, uses the term ‘‘District bank’’ to

describe banks operating under the

Code of Laws of the District of

Columbia. (See definition of ‘‘District

bank’’ at proposed § 26.2(k).)

Definitions

Each of the agencies’ current

regulations sets forth definitions of key

terms used in the regulation.

The proposed regulations change

some of the current definitions. A

discussion of the substantive differences

between the current rules and proposals

follows.

Anticompetitive Effect

The current regulations neither use

nor define the term ‘‘anticompetitive

effect.’’

The proposed regulations define the

term to mean ‘‘a monopoly or

substantial lessening of competition.’’

This term is used in the Regulatory

Standards exemption. Under that

exemption, the appropriate agency may

approve a request for an exemption to

the Interlocks Act if, among other

things, the agency finds that

continuation of service by the

management official does not produce

an anticompetitive effect with respect to

the affected institution. The statute does

not define the term ‘‘anticompetitive

effect,’’ nor does the legislative history

to the CDRI Act point to a particular

definition.

The context of the Regulatory

Standards exemption suggests, however,

that the agencies should apply the term

‘‘anticompetitive effect’’ in a manner

that permits interlocks that present no

substantial lessening of competition. By

prohibiting an interlock that would

result in a monopoly or substantial

lessening of competition, the proposed

definition preserves the free flow of

credit and other banking services that

the Interlocks Act is designed to protect.

Another benefit of the proposed

definition is that it is familiar to the

banking industry, given that it is

derived from the Bank Merger Act (12

U.S.C. 1828(c)). This enables the

agencies to accomplish the legislative

purpose of the Interlocks Act without

imposing unnecessary regulatory

burdens.

Area Median Income

The current regulations do not use the

term ‘‘area median income,’’ and,

therefore, do not define this term.

The proposed regulations define ‘‘area

median income’’ as the median family

income for the metropolitan statistical

area (MSA) in which an institution is

located or the statewide

nonmetropolitan median family income

if an institution is located outside an

MSA. This term is used in the definition

of ‘‘low- and moderate-income areas,’’

which in turn is used in the

implementation of the Management

Consignment exemption.

Contiguous or Adjacent Cities, Towns,

or Villages

The current regulations define

‘‘adjacent cities, towns, or villages’’ as

cities, towns, or villages whose borders

are within 10 road miles from each

other. They also define ‘‘contiguous

cities, towns, or villages’’ as cities,

towns, or villages whose borders touch.

The statute and regulations apply these

terms to prohibit interlocks involving

small institutions that are located in

contiguous or adjacent cities, towns, or

villages.

The proposed regulations combine

these two definitions, given that

contiguous cities, towns, or villages

necessarily are within 10 miles of each

other.

Critical

The current regulations neither use

nor define ‘‘critical.’’

The proposed regulations define the

term in connection with the Regulatory

Standards exemption. Under that

exemption, the appropriate agency must

find that a proposed management

official is critical to the safe and sound

operations of the affected institution. 12

U.S.C. 3207(b)(2)(A). Neither the statute

nor its legislative history define

‘‘critical.’’

The agencies are concerned that a

narrow interpretation of this term would

nullify the Regulatory Standards

exemption. If someone were ‘‘critical’’

to the safe and sound operations of an

institution only if the institution would

fail but for the service of the person in

question, the exemption would have

little relevance because the standard

would be practically impossible to meet.

Given that Congress clearly intended for

the Regulatory Standards exemption to

permit interlocks under some

circumstances, the question thus

becomes how to define those

circumstances.

This proposal addresses the issue by

stating that the agencies will consider a

person to be critical to a depository

organization if the person will play an

important role in helping the institution

either address current problems or

maintain safe and sound operations

going forward. The agencies believe that

this approach is consistent with the
67426 Federal Register / Vol. 60, No. 250 / Friday, December 29, 1995 / Proposed Rules

legislative intent by insuring that only

persons of demonstrated expertise and

importance to the institution will be

allowed to serve pursuant to a

Regulatory Standards exemption.

Low- and Moderate-Income Areas

The current regulations permit

interlocks under certain circumstances

involving a depository organization

located ‘‘in a low income or other

economically depressed area.’’

However, the current rules do not define

‘‘low income’’ or ‘‘economically

depressed.’’

Section 209(c)(1)(A) of the Interlocks

Act (12 U.S.C. 3207(c)(1)(A)) authorizes

the appropriate agency to permit

interlocks pursuant to the Management

Consignment exemption if the agency

determines that the proposed service

would ‘‘improve the provision of credit

to low- and moderate-income areas.’’

The proposed regulations define ‘‘lowand moderate-income areas’’ as areas

where the median family income is less

than 100 percent of the area median

income. This definition is consistent

with Title I, Subtitle A of the CDRI Act

(the Community Development Banking

and Financial Institutions Act of 1994)

(12 U.S.C. 4701–4718), which, like the

Management Consignment exemption

affecting institutions in low- and

moderate-income areas, is intended to

assist the flow of credit into

economically depressed areas. Section

103(17) of the CDRI Act (12 U.S.C.

4702(17)) defines ‘‘low income’’ to mean

not more than 80 percent of the area

median income. The agencies believe

that Congress, by using the term ‘‘lowand moderate-income’’ in the

Management Consignment exemption,

intended for that term to apply to an

area where the median family income

exceeds 80 percent of the median

income for the area. The agencies have

selected 100 percent of the area median

income as the cutoff for defining ‘‘lowand moderate-income areas’’ because

they believe that a higher threshold

would permit interlocks that would not

improve the provision of credit to lowand moderate-income areas.

Management Official

The current regulations define

‘‘management official’’ to include an

employee or officer ‘‘with management

functions’’ (including a branch

manager), a director, a trustee of an

organization under the control of

trustees, or any person who has a

representative or nominee serving in

such capacity. The definition excludes

(1) a person whose management

functions relate either exclusively to the

business of retail merchandising or

manufacturing or principally to

business outside the United States of a

foreign commercial bank and (2) a

person excluded by section 202(4) of the

Interlocks Act (12 U.S.C. 3201(4)).

The proposed regulations adopt the

definition of ‘‘management official’’ set

forth in the current rules, except that the

phrase ‘‘an employee or officer with

management functions’’ is removed. It is

replaced by the term ‘‘senior executive

officer’’ as defined by each of the

agencies in their regulations pertaining

to the prior notice of changes in senior

executive officers, which implement

section 32 of the Federal Deposit

Insurance Act (FDI Act) (12 U.S.C.

1831i) as added by section 914 of the

Financial Institutions Reform, Recovery,

and Enforcement Act of 1989 (FIRREA).

The agencies are proposing this

change to eliminate the uncertainty and

attendant compliance burden created by

the ambiguous term ‘‘management

functions.’’ The proposals incorporate

specific illustrative examples of

positions at depository organizations

that will be treated as senior executive

officers. See 12 CFR 5.51(c)(3) (OCC); 12

CFR 225.71(a) (Board); 12 CFR

303.14(a)(3) (FDIC); and 12 CFR

574.9(a)(2) (OTS). The agencies believe

that these definitions will allow

depository organizations to identify

impermissible interlocks with greater

certainty and thus will enhance

compliance. The agencies request

comment on the advisability of defining

‘‘management official’’ by using ‘‘senior

executive officer’’ rather than

‘‘employee or officer with management

functions.’’

The current definition of

‘‘management official’’ exempts those

individuals whose management

functions relate to retail merchandising

or manufacturing. Stated another way,

the current exemption applies to a

category of persons whose

responsibilities are unrelated to the

business of a deposit-taking institution.

The agencies specifically ask

commenters to address whether the

agencies should exempt a broader

category of management officials whose

duties are unrelated to the provision of

financial services by a depository

institution or depository holding

company, and if so, how the agencies

should define that category of excluded

officials.

Relevant Metropolitan Statistical Area

(RMSA)

The current regulations define

‘‘relevant metropolitan statistical area’’

as an MSA, a primary MSA, or a

consolidated MSA that is not comprised

of designated primary MSAs as defined

by the Office of Management and

Budget (OMB). This definition is

derived from section 203(1) of the

Interlocks Act (12 U.S.C. 3202(1)).

The proposed regulations define

‘‘relevant metropolitan statistical area

(RMSA)’’ as an MSA, a primary MSA, or

a consolidated MSA that is not

comprised of designated primary MSAs,

to the extent that the OMB defines and

applies these terms. This change reflects

the fact that the OMB defines

‘‘consolidated MSA’’ to include two or

more primary MSAs. Given that

consolidated MSAs, by the OMB’s

definition, are comprised of primary

MSAs, the reference to consolidated

MSAs in the Interlocks Act and the

agencies’ regulations is inappropriate.

The proposed change enables the

agencies to implement the statute in a

way that complies with both the spirit

and the letter of the Interlocks Act.

Representative or Nominee

The current regulations define

‘‘representative or nominee’’ as a person

who serves as a management official

and has an express or implied obligation

to act on behalf of another person with

respect to management responsibilities.

The current definition goes on to state

that the determination of whether

someone is a representative or nominee

depends on the facts of a particular case

and that certain relationships (such as

family, employment, and so on) may

evidence an express or implied

obligation to act.

The proposed regulations also define

‘‘representative or nominee’’ as someone

who serves as a management official

and has an obligation to act on behalf of

someone else. The proposed definition

deletes the rest of the current definition,

however, and inserts in lieu thereof a

statement that the appropriate agency

will find that someone has an obligation

to act on behalf of someone else only if

there is an agreement (express or

implied) to act on behalf of another. The

agencies propose this change to clarify

that the determination that a

representative or nominee situation

exists will depend on whether there is

a basis to conclude that an agreement

exists to act on someone’s behalf. The

agencies note that the current definition

provides specific guidance for

determining when a representative or

nominee relationship might be found to

exist, and request comment on whether

the current definition, the proposed

definition, or another definition is

preferable.

Prohibitions

The current regulations prohibit

interlocks in the following three
Federal Register / Vol. 60, No. 250 / Friday, December 29, 1995 / Proposed Rules 67427

3A community as that term is defined in the

proposals is smaller than an RMSA. There may be

several communities in one RMSA.

4The Interlocks Act contains an additional

exemption for savings associations and savings and

loan holding companies that have issued stock in

connection with a qualified stock issuance pursuant

to section 10(q) of the Home Owners’ Loan Act (12

U.S.C. 1467a(q)). See 12 U.S.C. 3204(9). The OTS

therefore proposes to continue to list an additional

exemption in its interlocks regulation which the

other agencies do not list. Another exemption

provides for interlocks as a result of an emergency

acquisition of a savings association authorized in

accordance with section 13(k) of the Federal

Deposit Insurance Act (12 U.S.C. 1823(k)) if the

FDIC has given its approval to the interlock. The

FDIC therefore proposes to continue to list an

additional exemption in its management interlocks

regulation which the other agencies do not list.

5See, e.g., the OCC’s Bank Merger Competitive

Analysis Screen (OCC Advisory Letter 95–4, July

18, 1995); Department of Justice Merger Guidelines

(49 FR 26823, June 29, 1984) (applied by the Board);

FDIC Statement of Policy: Bank Merger

Transactions (54 FR 39045, Sept. 22, 1989).

instances. First, no two unaffiliated

depository organizations may have an

interlock if they (or their depository

institution affiliates) have depository

institution offices in the same

community. Second, a depository

organization may not have an interlock

with any unaffiliated depository

organization if either depository

organization has assets exceeding $20

million and the depository

organizations (or depository institution

affiliates of either) have depository

institution offices in the same RMSA.3

Third, if a depository organization has

total assets exceeding $1 billion, it (and

its affiliates) may not have an interlock

with any depository organization with

total assets exceeding $500 million (or

affiliate thereof), regardless of location.

The proposed regulations amend the

rules as they apply to institutions with

assets of less than $20 million to better

conform to the purposes of the

Interlocks Act. Whereas the current

rules prohibit interlocks in an RMSA if

one of the organizations has total assets

of $20 million or more, the proposed

rules would apply the RMSA-wide

prohibition only if both organizations

have total assets of $20 million or more.

Interlocks within a community

involving unaffiliated depository

organizations would continue to be

prohibited.

The agencies believe that this

proposed change is consistent with both

the language and the intent of the

Interlocks Act. While the statute uses

the plural ‘‘depository institutions’’ in

section 203(1) of the Interlocks Act (12

U.S.C. 3202(1)), in context, neither the

statute nor its legislative history

compels the conclusion that the

interlock must involve two institutions

with less than $20 million in assets

before the less restrictive prohibition

applies.

The Interlocks Act seeks to prohibit

interlocks that could enable two

institutions to engage in anticompetitive

behavior. However, an institution with

total assets of less than $20 million is

likely to derive most of its business from

the community in which it is located

and is unlikely to compete with

institutions that do not have offices in

that community. Therefore, interlocks

involving one institution with assets

under $20 million and another

institution with assets of at least $20

million not in the same community are

not likely to lead to the anticompetitive

conduct that the Interlocks Act is

designed to prohibit.

The agencies believe, moreover, that

the proposed change will promote

rather than inhibit competition.

Expanding the pool of managerial talent

for institutions with assets under $20

million could enhance the ability of

smaller institutions to compete by

improving the management of these

institutions.

The proposed regulations reflect the

change affecting depository

organizations with less than $20 million

in total assets. They also set forth the

prohibition against interlocks involving

large depository organizations but do

not change the substance of that

prohibition. The proposed regulations

change the style of all three prohibitions

in order to make them easier to

understand.

The agencies invite comment on any

aspect of this proposed section. The

agencies specifically seek comment on

whether the proposed reinterpretation

of 12 U.S.C. 3202(1) might result in

anticompetitive effects and thus run

counter to the legislative intent of the

Interlocks Act. For example, could the

proposed change enable a large bank to

engage in anticompetitive conduct by

creating interlocks with one or more

smaller depository institutions located

in the same RMSA but not in the same

community (a ‘‘hub and spokes’’

interlock)? The agencies also seek

comment on whether the final rule

should specifically address such

situations.

Interlocking Relationships Expressly

Permitted by Statute

The current regulations restate most

of the exemptions that are expressly

permitted by the Interlocks Act and list

those exemptions that the agencies have

permitted by regulation pursuant to the

broad exemptive authority that applied

before the enactment of the CDRI Act.

The current regulations also address

interlocks involving diversified savings

and loan holding companies.

The proposed regulations state the

exemptions found in 12 U.S.C. 3204(1)-

(8).4 The proposals reorder the

exemptions set forth in the current

regulations in order to conform the list

of exemptions to the list set forth in the

Interlocks Act.

Regulatory Standards Exemption

The current regulations contain no

Regulatory Standards exemption.

The proposed regulations set forth the

standards that a depository organization

must satisfy in order to obtain a

Regulatory Standards exemption. The

proposal implements the requirement

regarding certification by allowing a

depository organization’s board of

directors (or the organizers of a

depository organization that is being

formed) to certify to the appropriate

agency that no other qualified

candidates have been found after

undertaking reasonable efforts to locate

other qualified candidates who are not

prohibited from service under the

Interlocks Act. If read narrowly, the

Interlocks Act could require a

depository organization to evaluate

every person in a given locale that might

be qualified and interested. This would

create a requirement that, in practice,

would be impossible to satisfy. Given

that Congress would not have included

an exemption that would have no

practical application, the agencies

believe that the proposed

‘‘reasonableness’’ standard is consistent

with the legislative intent.

The proposed regulations also set

forth presumptions that the agencies

will apply when reviewing an

application for a Regulatory Standards

exemption. First, each agency will

presume that an interlock will not have

an anticompetitive effect if it involves

institutions that, if merged, would not

trigger a challenge from the agencies on

competitive grounds. This presumption

is unavailable, however, for interlocks

subject to the Major Assets prohibition.

Generally, the agencies will not object

to a merger on competitive grounds if

the post-merger Herfindahl-Hirschman

Index (HHI) for the market is less than

1800 and the merger increases the HHI

by 200 points or less. This presumption

will enable applicants to avoid the

unnecessary burden of submitting a

competitive analysis in several

instances. The agencies have found this

HHI benchmark to be a useful guide to

evaluating anticompetitive effects of

interlocks.5 However, simply analyzing

the HHI for the two organizations in a

potential interlock does not take into
67428 Federal Register / Vol. 60, No. 250 / Friday, December 29, 1995 / Proposed Rules

6This presumption also applies to individuals

whose service as a senior executive officer is

approved by the OCC pursuant to the standard

conditions imposed on newly chartered national

banks and to individuals whose service as a

management official is approved by the FDIC as a

condition of a grant of deposit insurance prior to

the opening of the depository institution.

account any anticompetitive effects that

might stem from a previously existing

interlock. Accordingly, the agencies are

requesting comments as to how other

interlocks involving depository

organizations should be viewed in

applying this presumption.

The second presumption to be

applied by the agencies is that a person

is critical to an institution’s safe and

sound operations if the agencies also

approved that individual under section

914 of FIRREA and the institution in

question either was a newly chartered

institution, failed to meet minimum

capital requirements, or otherwise was

in a ‘‘troubled condition’’ as defined in

the reviewing agency’s section 914

regulation at the time the section 914

filing was approved.6

The agencies invite comment on the

utility of the proposed presumptions

and on whether other presumptions also

should apply.

The proposed regulations also address

the duration of an interlock permitted

under the Regulatory Standards

exemption. The statute does not require

that these interlocks terminate. In light

of this open-ended grant of authority,

the agencies are not proposing a specific

term for a permitted exemption. Instead,

the agencies may require an institution

to terminate the interlock if an agency

determines that the management official

in question either no longer is critical to

the safe and sound operations of the

affected organization or that continued

service will produce an anticompetitive

effect. The agencies will provide

affected organizations an opportunity to

submit information before they make a

final determination to require

termination of an interlock.

Grandfathered Interlocking

Relationships—Removed

The current regulations restate the

grandfather provisions set forth in

section 206 of the Interlocks Act (12

U.S.C. 3205). Section 338(a) of the CDRI

Act authorizes the agencies to extend a

grandfathered interlock for an

additional five years if the management

official in question satisfied the

statutory criteria for obtaining an

extension.

The proposed regulations remove the

sections addressing the grandfather

exemption because they are unnecessary

and redundant in light of the statute.

Individuals who wished to extend their

exemption already have applied for and

received an exemption if they met the

statutory criteria. The grandfathered

exemptions will expire on November

10, 1998, unless Congress amends the

Interlocks Act again to provide another

opportunity for an extension.

Management Consignment Exemption

The current regulations set forth a

number of instances in which the

agencies may permit an exemption to

the Interlocks Act. However, the

statutory provisions authorizing the

agencies to grant exemptions have been

amended, thereby requiring that the

current regulations be amended as well.

The Management Consignment

exemption set forth in section 209(c) of

the Interlocks Act (12 U.S.C. 3207(c)) is

modelled after certain exemptions that

appear in the agencies’ current

regulations.

The proposed regulations implement

the Management Consignment

exemption, and restate the statutory

criteria, with three clarifications. First,

the proposed rules state that the

agencies consider a ‘‘newly chartered

institution’’ to be an institution that has

been chartered for less than two years at

the time it files an application for

exemption. This standard is consistent

with certain other banking agency

thresholds for determining when an

institution is considered newly

chartered (see, e.g., 12 CFR 5.51(d),

225.72(a)(1); 303.14(b)).

Second, the proposal clarifies that the

exemption available for ‘‘minority- and

women-owned institutions’’ is available

for an institution that is owned either by

minorities or women. In noting the

types of exemptions that the Federal

banking agencies have approved, the

House Conference Report to the CDRI

Act (H.R. Conf. Rep. No. 652, 103d

Cong., 2d Sess. 181 (1994)) (Conference

Report) states that the types of

institutions that have received

exemptions include those that are

‘‘owned by women or minorities.’’

These exemptions ultimately were

codified in the Interlocks Act.

Accordingly, the agencies have

concluded that Congress intended the

Management Consignment exemption to

assist institutions owned by women

and/or by minorities, but did not intend

to require the institution to be owned by

both.

Third, the proposal permits an

interlock if the interlock would

strengthen the management of either a

newly chartered institution or an

institution that is in an unsafe or

unsound condition. Section 209(c)(1)(C)

of the Interlocks Act (12 U.S.C.

3207(c)(1)(C)) permits an exemption if

the interlock would ‘‘strengthen the

management of newly chartered

institutions that are in an unsafe or

unsound condition.’’ However, this

provision contains what appears on its

face to be an error, given that an

exemption limited to situations

involving newly chartered institutions

that also are in an unsafe and unsound

condition would have no practical

utility. The chartering agencies do not

approve an application for a bank or

thrift charter unless the applicant

seeking a charter can demonstrate that

the proposed new financial institution

will operate in a safe and sound manner

for the foreseeable future. While there

may be an extraordinary instance where

a newly chartered institution

immediately experiences unforeseen

problems so severe that they threaten

the safety and soundness of that

institution, there is nothing in the

legislative history to suggest that

Congress intended to limit the

Management Consignment exemption to

such rare instances.

Moreover, the legislative history of

the CDRI Act suggests that the agencies

are to apply the Management

Consignment exemption in cases

involving either newly chartered

institutions or institutions that are in an

unsafe or unsound condition. The

Conference Report notes that the

agencies have used their exemptive

authority to grant exemptions in limited

cases where institutions ‘‘are

particularly in need of management

guidance and expertise to operate in a

safe and sound manner.’’ Id. The

Conference Report goes on to state that

‘‘Examples of exceptions permissible

under an agency management official

consignment program include

improving the provision of credit to

low- and moderate-income areas,

increasing the competitive position of

minority- and women-owned

institutions, and strengthening he [sic]

management of newly chartered

institutions or institutions that are in an

unsafe or unsound condition.’’ Id. at 182

(emphasis added).

Finally, Congress used the

exemptions in the agencies’ current

rules as the model for the Management

Consignment exemption. See id. at 181–

182. These exemptions distinguish

newly chartered institutions from

institutions that are in an unsafe or

unsound condition. The reference in the

CDRI Act’s legislative history to the

current regulatory exemptions suggests

that Congress intended to codify these

exemptions.

For these reasons, the agencies

propose to permit exemptions pursuant
Federal Register / Vol. 60, No. 250 / Friday, December 29, 1995 / Proposed Rules 67429

7This presumption also applies to an individual

whose service as a senior executive officer of a

national bank is approved pursuant to the standard

conditions imposed by the OCC on newly chartered

national banks and to individuals whose service as

a management official is approved by the FDIC as

a condition of a grant of deposit insurance prior to

the opening of the depository institution.

to the Management Consignment

exemption if the management official

will strengthen either a newly chartered

institution or an institution that is in an

unsafe or unsound condition.

Commenters are requested to address

this approach.

The proposals set forth two

presumptions that the agencies will

apply in connection with an application

for an exemption under the

Management Consignment exemption.

First, the agencies will presume that an

individual is capable of strengthening

the management of an institution that

has been chartered for less than two

years if the reviewing agency approved

the individual to serve as a management

official of that institution pursuant to

section 914 of FIRREA.7 Second, the

agencies will presume that an

individual is capable of strengthening

the management of an institution that is

in an unsafe or unsound condition if the

reviewing agency approved the

individual to serve under section 914 as

a management official of that institution

at a time when the institution was not

in compliance with minimum capital

requirements or otherwise was in a

‘‘troubled condition.’’

The agencies believe that

presumptions of suitability are less

valid when applied to the other

Management Consignment exemptions

because there is no reason to conclude

that a management official approved

under section 914 necessarily will

improve the flow of credit to low- and

moderate-income areas or increase the

competitive position of minority- or

woman-owned institutions. No

presumption regarding effects on

competition is proposed, given that this

is not a factor to be considered by the

agencies when reviewing an application

for a Management Consignment

exemption.

The agencies seek comment on the

utility of the proposed presumptions

and on whether additional

presumptions should apply as well.

The proposed regulations set forth the

limits on the duration of a Management

Consignment exemption. The Interlocks

Act limits a Management Consignment

exemption to two years, with a possible

extension for up to an additional two

years if the applicant satisfies at least

one of the criteria for obtaining a

Management Consignment exemption.

The proposed regulations implement

this limitation by requiring interested

parties to submit an application for an

extension at least 30 days before the

expiration of the initial term of the

exemption and by clarifying that the

presumptions that apply to initial

applications also apply to extension

applications.

Change in Circumstances

The current regulations provide a 15-

month grace period for

nongrandfathered interlocks that

become impermissible due to a change

in circumstances. This period may be

shortened by the agencies under

appropriate circumstances.

The proposed regulations revise the

style of this section in the current

regulations but not its substance.

The agencies seek comment on the

proposed continued availability of a

grace period.

Enforcement

The current regulations set forth the

jurisdiction of the agencies that enforce

the Interlocks Act.

The proposed regulations simplify the

style of this section in the current

regulations but not its substance.

Small Market Share Exemption

In 1994, the OCC, Board, and FDIC

published separate notices of proposed

rulemaking seeking comment on a

proposed exemption for interlocks

involving institutions that, on a

combined basis, would control less than

20 percent of the deposits in a

community or relevant MSA. These

agencies published small market share

exemption proposals pursuant to the

broad exemptive authority vested in the

agencies prior to the enactment of the

CDRI Act. However, as previously

noted, the CDRI Act amended the

agencies’ broad rulemaking authority by

authorizing the agencies to grant

exemptions only in more narrow

circumstances. In light of this statutory

change, the three agencies believe that

it would be inappropriate to adopt the

proposed small market share exemption.

The FDIC already has withdrawn its

proposal regarding the small market

share exemption (see 60 FR 7139

(February 7, 1995)). The OCC and Board

hereby withdraw their respective

proposals.

Paperwork Reduction Act

The OCC, FDIC, and OTS invite

comment on:

(1) Whether the proposed collection

of information contained in this notice

of proposed rulemaking is necessary for

the proper performance of each agency’s

functions, including whether the

information has practical utility;

(2) The accuracy of each agency’s

estimate of the burden of the proposed

information collection;

(3) Ways to enhance the quality,

utility, and clarity of the information to

be collected; and

(4) Ways to minimize the burden of

the information collection on

respondents, including through the use

of automated collection techniques or

other forms of information technology.

Respondents are not required to

respond to this collection of information

unless it displays a currently valid OMB

control number.

OCC: The collection of information

requirements contained in this notice of

proposed rulemaking have been

submitted to the Office of Management

and Budget for review in accordance

with the Paperwork Reduction Act of

1995 (44 U.S.C. 3507(d)). Comments on

the collections of information should be

sent to the Office of Management and

Budget, Paperwork Reduction Project

(1557–0196), Washington, DC 20503,

with copies to the Legislative and

Regulatory Activities Division (1557–

0196), Office of the Comptroller of the

Currency, 250 E Street, SW,

Washington, DC 20219.

The collection of information

requirements in this proposed rule are

found in 12 CFR 26.4(h)(1)(i), 26.5(a)(1),

26.5(a)(2), 26.6(a), and 26.6(c). This

information is required to evidence

compliance with the requirements of the

Interlocks Act by national banks and

District banks. The likely respondents

are national banks and District banks.

Estimated average annual burden

hours per respondent: 3 hours.

Estimated number of respondents:

100.

Start-up costs to respondents: None.

Board: In accordance with section

3506 of the Paperwork Reduction Act of

1995 (44 U.S.C. Ch. 35; 5 CFR 1320

Appendix A.1), the Board reviewed the

proposed rule under the authority

delegated to the Board by the Office of

Management and Budget. Comments on

the collections of information should be

sent to the Office of Management and

Budget, Paperwork Reduction Project

(7100–0046, 7100–0134, 7100–0171,

7100–0266), Washington, DC 20503,

with copies of such comments to be sent

to Mary M. McLaughlin, Federal

Reserve Board Clearance Officer,

Division of Research and Statistics, Mail

Stop 97, Board of Governors of the

Federal Reserve System, Washington,

DC 20551.

The collection of information

requirements in this proposed

rulemaking are found in 12 CFR
67430 Federal Register / Vol. 60, No. 250 / Friday, December 29, 1995 / Proposed Rules

212.4(h)(1)(i), 212.5(a)(1), 212.5(a)(2),

212.6(a), and 212.6(c). This information

is required to evidence compliance with

the requirements of the Interlocks Act as

amended by section 338 of the CDRI

Act. The respondents are state member

banks and subsidiary depository

institutions of bank holding companies.

Currently, information on

management official interlocks is

gathered as a part of the following

applications: membership in the Federal

Reserve System (OMB No. 7100–0046);

state member bank mergers (OMB No.

7100–0266); changes in bank control

(OMB No. 7100–0134); and bank

holding company acquisitions of

depository institutions (OMB No. 7100–

0171). The estimated portion of burden

for each application that is attributable

to management interlocks averages 4

hours, and the burden ranges from as

much as 6 hours to as little as 0.5 hours.

It is estimated that 822 applications are

filed annually, with an estimate of 3,288

hours of annual burden. Based on an

hourly cost of $20, the annual cost to

the public is estimated to be $65,760.

The Federal Reserve believes that the

proposed rule will have a minimal effect

on respondent burden.

The Federal Reserve may not conduct

or sponsor, and an organization is not

required to respond to, these

information collections unless they

display currently valid OMB control

numbers.

No issues of confidentiality under the

provisions of the Freedom of

Information Act normally arise for the

applications.

Comments are invited on: (1) Whether

the proposed revised collections of

information are necessary for the proper

performance of the Federal Reserve’s

functions, including whether the

information has practical utility; (2) the

accuracy of the Federal Reserve’s

estimate of the burden of the proposed

information collections, including the

cost of compliance; (3) ways to enhance

the quality, utility, and clarity of the

information to be collected; and (4)

ways to minimize the burden of

information collection on respondents,

including through the use of automated

collection techniques or other forms of

information technology.

FDIC: The collections of information

contained in this notice of proposed

rulemaking have been submitted to the

Office of Management and Budget for

review in accordance with the

Paperwork Reduction Act of 1995 (44

U.S.C. 3507(d)). Comments on the

collections of information should be

sent to the Office of Management and

Budget, Paperwork Reduction Project

(3604–0092), Washington, DC 20503,

with copies of such comments to be sent

to Steven F. Hanft, Office of the

Executive Secretary, Room F–453,

Federal Deposit Insurance Corporation,

550 17th Street, NW., Washington, DC

20429.

The collection of information

requirements in this proposed

regulation are found in 12 CFR

348.4(i)(1)(i), 348.5(a)(1), 348.5(a)(2),

348.6(a), and 348.6(c). This information

is required to evidence compliance with

the requirements of the Interlocks Act as

amended by section 338 of the CDRI

Act. The likely respondents are insured

nonmember banks.

Estimated number of respondents: 6

applicants per year.

Estimated average annual burden per

respondent: 4 hours.

Estimated annual frequency of

recordkeeping: Not applicable (one-time

application).

Estimated total annual recordkeeping

burden: 24 hours.

OTS: The collection of information

requirements contained in this notice of

proposed rulemaking have been

submitted to the Office of Management

and Budget for review in accordance

with the Paperwork Reduction Act of

1995 (44 U.S.C. 3507(d)). Comments on

the collection of information should be

sent to the Office of Management and

Budget, Paperwork Reduction Project

(1550), Washington, DC 20503, with

copies to the Business Transactions

Division (1550), Office of Thrift

Supervision, 1700 G Street, NW,

Washington, DC.

The collection of information

requirements in this proposed rule are

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

563f.5(a)(1), 563f.5(a)(2), 563f.6(a), and

563f.6(c). This information is required

to evidence compliance with the

requirements of the Interlocks Act by

savings associations. The likely

respondents are national savings

associations.

Estimated average annual burden

hours per respondent: 4 hours.

Estimated number of respondents: 8.

Start-up costs to respondents: None.

Regulatory Flexibility Act

Pursuant to section 605(b) of the

Regulatory Flexibility Act (RFA) (5

U.S.C. 605(b)), the initial regulatory

flexibility analysis otherwise required

under section 603 of the RFA (5 U.S.C.

603) is not required if the head of the

agency certifies that the rule will not

have a significant economic impact on

a substantial number of small entities

and the agency publishes such

certification and a succinct statement

explaining the reasons for such

certification in the Federal Register

along with its general notice of

proposed rulemaking.

Pursuant to section 605(b) of the RFA,

the agencies hereby certify that this

proposed rule will not have a significant

economic impact on a substantial

number of small entities. The agencies

expect that this proposal will not (1)

have significant secondary or incidental

effects on a substantial number of small

entities or (2) create any additional

burden on small entities. Moreover, the

changes to the exemptions available are

required by the Interlocks Act.

Accordingly, a regulatory flexibility

analysis is not required.

Executive Order 12866

OCC and OTS: The OCC and OTS

have determined that this proposal is

not a significant regulatory action under

Executive Order 12866.

Unfunded Mandates Act of 1995

OCC and OTS: Section 202 of the

Unfunded Mandates Act of 1995

(Unfunded Mandates Act) requires that

an agency prepare a budgetary impact

statement before promulgating a

proposed rule likely to result in a

Federal mandate that may result in the

annual expenditure of $100 million or

more in any one year by State, local, and

tribal governments, in the aggregate, or

by the private sector. If a budgetary

impact statement is required, section

205 of the Unfunded Mandates Act

requires an agency to identify and

consider a reasonable number of

alternatives before promulgating a

proposal.

The OCC and OTS have determined

that the proposed rule will not result in

expenditures by State, local, and tribal

governments, or by the private sector, of

more than $100 million in any one year.

Accordingly, neither the OCC nor the

OTS has prepared a budgetary impact

statement or specifically addressed the

regulatory alternatives considered.

List of Subjects

12 CFR Part 26

Antitrust, Banks, banking, Holding

companies, Management official

interlocks, National banks.

12 CFR Part 212

Antitrust, Banks, banking, Holding

companies, Management official

interlocks.

12 CFR Part 348

Antitrust, Banks, banking, Holding

companies.
Federal Register / Vol. 60, No. 250 / Friday, December 29, 1995 / Proposed Rules 67431

12 CFR Part 563f

Antitrust, Holding companies,

Management official interlocks, Savings

associations.

Office of the Comptroller of the

Currency

12 CFR CHAPTER I

Authority and Issuance

For the reasons set out in the joint

preamble, the OCC proposes to revise

part 26 of chapter I of title 12 of the

Code of Federal Regulations to read as

follows:

PART 26—MANAGEMENT OFFICIAL

INTERLOCKS

Sec.

26.1 Authority, purpose, and scope.

26.2 Definitions.

26.3 Prohibitions.

26.4 Interlocking relationships permitted by

statute.

26.5 Regulatory Standards exemption.

26.6 Management Consignment exemption.

26.7 Change in circumstances.

26.8 Enforcement.

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

§ 26.1 Authority, purpose, and scope.

(a) Authority. This part is issued

under the provisions of the Depository

Institution Management Interlocks Act

(Interlocks Act) (12 U.S.C. 3201 et seq.),

as amended, and the OCC’s general

rulemaking authority in 12 U.S.C. 93a.

(b) Purpose. The purpose of the

Interlocks Act and this part is to foster

competition by generally prohibiting a

management official from serving two

nonaffiliated depository organizations

in situations where the management

interlock likely would have an

anticompetitive effect.

(c) Scope. This part applies to

management officials of national banks,

District banks, and affiliates of either.

§ 26.2 Definitions.

For purposes of this part, the

following definitions apply:

(a) Affiliate. (1) The term affiliate has

the meaning given in section 202 of the

Interlocks Act (12 U.S.C. 3201). For

purposes of that section, shares held by

an individual include shares held by

members of his or her immediate family.

‘‘Immediate family’’ includes spouse,

mother, father, child, grandchild, sister,

brother, or any of their spouses, whether

or not any of their shares are held in

trust.

(2) For purposes of section 202(3)(B)

of the Interlocks Act (12 U.S.C.

3201(3)(B)), an affiliate relationship

involving a national bank based on

common ownership does not exist if the

OCC determines, after giving the

affected persons the opportunity to

respond, that the asserted affiliation was

established in order to avoid the

prohibitions of the Interlocks Act and

does not represent a true commonality

of interest between the depository

organizations. In making this

determination, the OCC considers,

among other things, whether a person,

including members of his or her

immediate family, whose shares are

necessary to constitute the group owns

a nominal percentage of the shares of

one of the organizations and the

percentage is substantially

disproportionate with that person’s

ownership of shares in the other

organization.

(b) Anticompetitive effect means a

monopoly or substantial lessening of

competition.

(c) Area median income means:

(1) The median family income for the

metropolitan statistical area (MSA), if a

depository organization is located in an

MSA; or

(2) The statewide nonmetropolitan

median family income, if a depository

organization is located outside an MSA.

(d) Community means city, town, or

village, and contiguous or adjacent

cities, towns, or villages.

(e) Contiguous or adjacent cities,

towns, or villages means cities, towns,

or villages whose borders touch each

other or whose borders are within 10

road miles of each other at their closest

points. The property line of an office

located in an unincorporated city, town,

or village is the boundary line of that

city, town, or village for the purpose of

this definition.

(f) Critical means important to

restoring or maintaining a depository

organization’s safe and sound

operations.

(g) Depository holding company

means a bank holding company or a

savings and loan holding company (as

more fully defined in section 202 of the

Interlocks Act (12 U.S.C. 3201)) having

its principal office located in the United

States.

(h) Depository institution means a

commercial bank (including a private

bank), a savings bank, a trust company,

a savings and loan association, a

building and loan association, a

homestead association, a cooperative

bank, an industrial bank, or a credit

union, chartered under the laws of the

United States and having a principal

office located in the United States.

Additionally, a United States office,

including a branch or agency, of a

foreign commercial bank is a depository

institution.

(i) Depository institution affiliate

means a depository institution that is an

affiliate of a depository organization.

(j) Depository organization means a

depository institution or a depository

holding company.

(k) District bank means any State bank

operating under the Code of Law of the

District of Columbia.

(l) Low- and moderate-income areas

means areas where the median family

income is less than 100 percent of the

area median income.

(m) Management official. (1) The term

management official includes:

(i) A director;

(ii) An advisory or honorary director

of a depository institution with total

assets of $100 million or more;

(iii) A senior executive officer as that

term is defined in 12 CFR 5.51(c)(3);

(iv) A branch manager;

(v) A trustee of a depository

organization under the control of

trustees; and

(vi) Any person who has a

representative or nominee serving in

any of the capacities in this paragraph

(m)(1).

(2) The term management official

does not include:

(i) A person whose management

functions relate exclusively to the

business of retail merchandising or

manufacturing;

(ii) A person whose management

functions relate principally to the

business outside the United States of a

foreign commercial bank; or

(iii) A person described in the

provisos of section 202(4) of the

Interlocks Act (12 U.S.C. 3201(4))

(referring to an officer of a Statechartered savings bank, cooperative

bank, or trust company that neither

makes real estate mortgage loans nor

accepts savings).

(n) Office means a principal or branch

office of a depository institution located

in the United States. Office does not

include a representative office of a

foreign commercial bank, an electronic

terminal, or a loan production office.

(o) Person means a natural person,

corporation, or other business entity.

(p) Relevant metropolitan statistical

area (RMSA) means an MSA, a primary

MSA, or a consolidated MSA that is not

comprised of designated primary MSAs

to the extent that these terms are

defined and applied by the Office of

Management and Budget.

(q) Representative or nominee means

a natural person who serves as a

management official and has an

obligation to act on behalf of another

person with respect to management

responsibilities. The OCC will find that

a person has an obligation to act on
67432 Federal Register / Vol. 60, No. 250 / Friday, December 29, 1995 / Proposed Rules

behalf of another person only if the first

person has an agreement, express or

implied, to act on behalf of the second

person with respect to management

responsibilities. The OCC will

determine, after giving the affected

persons an opportunity to respond,

whether a person is a representative or

nominee.

(r) Total assets. (1) The term total

assets means assets measured on a

consolidated basis and reported in the

most recent fiscal year-end Consolidated

Report of Condition and Income.

(2) The term total assets does not

include:

(i) Assets of a diversified savings and

loan holding company as defined by

section 10(a)(1)(F) of the Home Owners’

Loan Act (12 U.S.C. 1467a(a)(1)(F))

other than the assets of its depository

institution affiliate;

(ii) Assets of a bank holding company

that is exempt from the prohibitions of

section 4 of the Bank Holding Company

Act of 1956 pursuant to an order issued

under section 4(d) of that Act (12 U.S.C.

1843(d)) other than the assets of its

depository institution affiliate; or

(iii) Assets of offices of a foreign

commercial bank other than the assets

of its United States branch or agency.

(s) United States means the United

States of America, any State or territory

of the United States of America, the

District of Columbia, Puerto Rico,

Guam, American Samoa, and the Virgin

Islands.

§ 26.3 Prohibitions.

(a) Community. A management

official of a depository organization may

not serve at the same time as a

management official of an unaffiliated

depository organization if the

depository organizations in question (or

a depository institution affiliate thereof)

have offices in the same community.

(b) RMSA. A management official of a

depository organization may not serve at

the same time as a management official

of an unaffiliated depository

organization if the depository

organizations in question (or a

depository institution affiliate thereof)

have offices in the same RMSA and each

depository organization has total assets

of $20 million or more.

(c) Major assets. A management

official of a depository organization

with total assets exceeding $1 billion (or

any affiliate thereof) may not serve at

the same time as a management official

of an unaffiliated depository

organization with total assets exceeding

$500 million (or any affiliate thereof),

regardless of the location of the two

depository organizations.

§ 26.4 Interlocking relationships permitted

by statute.

The prohibitions of § 26.3 do not

apply in the case of any one or more of

the following organizations or to a

subsidiary thereof:

(a) A depository organization that has

been placed formally in liquidation, or

which is in the hands of a receiver,

conservator, or other official exercising

a similar function;

(b) A corporation operating under

section 25 or section 25A of the Federal

Reserve Act (12 U.S.C. 601 et seq. and

12 U.S.C. 611 et seq., respectively) (Edge

Corporations and Agreement

Corporations);

(c) A credit union being served by a

management official of another credit

union;

(d) A depository organization that

does not do business within the United

States except as an incident to its

activities outside the United States;

(e) A State-chartered savings and loan

guaranty corporation;

(f) A Federal Home Loan Bank or any

other bank organized solely to serve

depository institutions (a bankers’ bank)

or solely for the purpose of providing

securities clearing services and services

related thereto for depository

institutions and securities companies;

(g) A depository organization that is

closed or is in danger of closing as

determined by the appropriate Federal

depository institutions regulatory

agency and is acquired by another

depository organization. This exemption

lasts for five years, beginning on the

date the depository organization is

acquired; and

(h)(1) A diversified savings and loan

holding company (as defined in section

10(a)(1)(F) of the Home Owners’ Loan

Act (12 U.S.C. 1467a(a)(1)(F)) with

respect to the service of a director of

such company who also is a director of

an unaffiliated depository organization

if:

(i) Both the diversified savings and

loan holding company and the

unaffiliated depository organization

notify their appropriate Federal

depository institutions regulatory

agency at least 60 days before the dual

service is proposed to begin; and

(ii) The appropriate regulatory agency

does not disapprove the dual service

before the end of the 60-day period.

(2) The OCC may disapprove a notice

of proposed service if it finds that:

(i) The service cannot be structured or

limited so as to preclude an

anticompetitive effect in financial

services in any part of the United States;

(ii) The service would lead to

substantial conflicts of interest or unsafe

or unsound practices; or

(iii) The notificant failed to furnish all

the information required by the OCC.

(3) The OCC may require that any

interlock permitted under this

paragraph (h) be terminated if a change

in circumstances occurs with respect to

one of the interlocked depository

organizations that would have provided

a basis for disapproval of the interlock

during the notice period.

§ 26.5 Regulatory Standards exemption.

(a) Criteria. The OCC may permit an

interlock that otherwise would be

prohibited by the Interlocks Act and

§ 26.3 if:

(1) The board of directors of the

depository organization (or the

organizers of a depository organization

being formed) that seeks the exemption

provides a resolution to the OCC

certifying that the organization, after the

exercise of reasonable efforts, is unable

to locate any other candidate from the

community or RMSA, as appropriate,

who:

(i) Possesses the level of expertise

required by the depository organization

and who is not prohibited from service

by the Interlocks Act; and

(ii) Is willing to serve as a

management official; and

(2) The OCC, after reviewing an

application submitted by the depository

organization seeking the exemption,

determines that:

(i) The management official is critical

to the safe and sound operations of the

affected depository organization; and

(ii) Service by the management

official will not produce an

anticompetitive effect with respect to

the depository organization.

(b) Presumptions. The OCC applies

the following presumptions when

reviewing any application for a

Regulatory Standards exemption:

(1) An interlock has no

anticompetitive effect if it involves

depository institutions that, if merged,

would not cause the post-merger

Herfindahl-Hirschman Index (HHI) to

exceed 1800 and would not cause the

HHI to increase by more than 200

points. This presumption does not

apply to institutions subject to the major

assets prohibition of § 26.3(c).

(2) A proposed management official is

critical to the safe and sound operations

of a depository institution if that official

is approved by the OCC to serve as a

director or senior executive officer of

that institution pursuant to 12 CFR 5.51

or pursuant to conditions imposed on a

newly chartered national bank and the

institution had operated for less than

two years, was not in compliance with

minimum capital requirements, or

otherwise was in a ‘‘troubled condition’’
Federal Register / Vol. 60, No. 250 / Friday, December 29, 1995 / Proposed Rules 67433

as defined in 12 CFR 5.51 at the time the

service under that section was

approved.

(c) Duration of interlock. An interlock

permitted under this section may

continue until the OCC notifies the

affected organizations otherwise. The

OCC may require a national bank to

terminate any interlock permitted under

this section if the OCC concludes, after

giving the affected persons the

opportunity to respond, that the

determinations under paragraph (a)(2) of

this section no longer may be made.

§ 26.6 Management Consignment

exemption.

(a) Criteria. The OCC may permit an

interlock that otherwise would be

prohibited by the Interlocks Act and

§ 26.3 if the OCC, after reviewing an

application submitted by the depository

organization seeking an exemption,

determines that the interlock would:

(1) Improve the provision of credit to

low- and moderate-income areas;

(2) Increase the competitive position

of a minority- or woman-owned

depository organization;

(3) Strengthen the management of a

depository institution that has been

chartered for less than two years at the

time an application is filed under this

part; or

(4) Strengthen the management of a

depository institution that is in an

unsafe or unsound condition as

determined by the OCC on a case-bycase basis.

(b) Presumptions. The OCC applies

the following presumptions when

reviewing any application for a

Management Consignment exemption:

(1) A proposed management official is

capable of strengthening the

management of a depository institution

described in paragraph (a)(3) of this

section if that official is approved by the

OCC to serve as a director or senior

executive officer of that institution

pursuant to 12 CFR 5.51 or pursuant to

conditions imposed on a newly

chartered national bank and the

institution had operated for less than

two years at the time the service under

12 CFR 5.51 was approved; and

(2) A proposed management official is

capable of strengthening the

management of a depository institution

described in paragraph (a)(4) of this

section if that official is approved by the

OCC to serve as a director or senior

executive officer of that institution

pursuant to 12 CFR 5.51 and the

institution was not in compliance with

minimum capital requirements or

otherwise was in a ‘‘troubled condition’’

as defined under 12 CFR 5.51 at the

time service under that section was

approved.

(c) Duration of interlock. An interlock

granted under this section may continue

for a period of two years from the date

of approval. The OCC may extend this

period for one additional two-year

period if the depository organization

applies for an extension at least 30 days

before the current exemption expires

and satisfies one of the criteria specified

in paragraph 26.6(a) of this section. The

provisions set forth in paragraph (b) of

this section also apply to applications

for extensions.

§ 26.7 Change in circumstances.

(a) Termination. A management

official shall terminate his or her service

or apply for an exemption to the

Interlocks Act if a change in

circumstances causes the service to

become prohibited under that Act. A

change in circumstances may include,

but is not limited to, an increase in asset

size of an organization, a change in the

delineation of the RMSA or community,

the establishment of an office, an

acquisition, a merger, a consolidation,

or any reorganization of the ownership

structure of a depository organization

that causes a previously permissible

interlock to become prohibited.

(b) Transition period. A management

official described in paragraph (a) of this

section may continue to serve the

depository institution involved in the

interlock for 15 months following the

date of the change in circumstances.

The OCC may shorten this period under

appropriate circumstances.

§ 26.8 Enforcement.

Except as noted in this section, the

OCC administers and enforces the

Interlocks Act with respect to national

banks, District banks, and affiliates of

either, and may refer any case of a

prohibited interlocking relationship

involving these institutions to the

Attorney General of the United States to

enforce compliance with the Interlocks

Act and this part. If an affiliate of a

national bank or a District bank is

subject to the primary regulation of

another Federal depository organization

supervisory agency, then the OCC does

not administer and enforce the

Interlocks Act with respect to that

affiliate.

Dated: November 27, 1998.

Eugene A. Ludwig,

Comptroller of the Currency.

Federal Reserve System

12 CFR CHAPTER II

Authority and Issuance

For the reasons set forth in the joint

preamble, the Board proposes to revise

part 212 of chapter II of title 12 of the

Code of Federal Regulations to read as

follows:

PART 212—MANAGEMENT OFFICIAL

INTERLOCKS

Sec.

212.1 Authority, purpose, and scope.

212.2 Definitions.

212.3 Prohibitions.

212.4 Interlocking relationships permitted

by statute.

212.5 Regulatory Standards exemption.

212.6 Management Consignment

exemption.

212.7 Change in circumstances.

212.8 Enforcement.

212.9 Effect of Interlocks Act on Clayton

Act.

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

19.

§ 212.1 Authority, purpose, and scope.

(a) Authority. This part is issued

under the provisions of the Depository

Institution Management Interlocks Act

(Interlocks Act) (12 U.S.C. 3201 et seq.),

as amended.

(b) Purpose. The purpose of the

Interlocks Act and this part is to foster

competition by generally prohibiting a

management official from serving two

nonaffiliated depository organizations

in situations where the management

interlock likely would have an

anticompetitive effect.

(c) Scope. This part applies to

management officials of state member

banks, bank holding companies, and

their affiliates.

§ 212.2 Definitions.

For purposes of this part, the

following definitions apply:

(a) Affiliate. (1) The term affiliate has

the meaning given in section 202 of the

Interlocks Act (12 U.S.C. 3201). For

purposes of that section, shares held by

an individual include shares held by

members of his or her immediate family.

‘‘Immediate family’’ includes spouse,

mother, father, child, grandchild, sister,

brother, or any of their spouses, whether

or not any of their shares are held in

trust.

(2) For purposes of section 202(3)(B)

of the Interlocks Act (12 U.S.C.

3201(3)(B)), an affiliate relationship

based on common ownership does not

exist if the Board determines, after
67434 Federal Register / Vol. 60, No. 250 / Friday, December 29, 1995 / Proposed Rules

giving the affected persons the

opportunity to respond, that the

asserted affiliation was established in

order to avoid the prohibitions of the

Interlocks Act and does not represent a

true commonality of interest between

the depository organizations. In making

this determination, the Board considers,

among other things, whether a person,

including members of his or her

immediate family, whose shares are

necessary to constitute the group owns

a nominal percentage of the shares of

one of the organizations and the

percentage is substantially

disproportionate with that person’s

ownership of shares in the other

organization.

(b) Anticompetitive effect means a

monopoly or substantial lessening of

competition.

(c) Area median income means:

(1) The median family income for the

metropolitan statistical area (MSA), if a

depository organization is located in an

MSA; or

(2) The statewide nonmetropolitan

median family income, if a depository

organization is located outside an MSA.

(d) Community means city, town, or

village, or contiguous and adjacent

cities, towns, or villages.

(e) Contiguous or adjacent cities,

towns, or villages means cities, towns,

or villages whose borders touch each

other or whose borders are within 10

road miles of each other at their closest

points. The property line of an office

located in an unincorporated city, town,

or village is the boundary line of that

city, town, or village for the purpose of

this definition.

(f) Critical, as used in § 212.5, means

important to restoring or maintaining a

depository organization’s safe and

sound operations.

(g) Depository holding company

means a bank holding company or a

savings and loan holding company (as

more fully defined in section 202 of the

Interlocks Act (12 U.S.C. 3201)) having

its principal office located in the United

States.

(h) Depository institution means a

commercial bank (including a private

bank), a savings bank, a trust company,

a savings and loan association, a

building and loan association, a

homestead association, a cooperative

bank, an industrial bank, or a credit

union, chartered under the laws of the

United States and having a principal

office located in the United States.

Additionally, a United States office,

including a branch or agency, of a

foreign commercial bank is a depository

institution.

(i) Depository institution affiliate

means a depository institution that is an

affiliate of a depository organization.

(j) Depository organization means a

depository institution or a depository

holding company.

(k) Low- and moderate-income areas

means areas where the median family

income is less than 100 percent of the

area median income.

(l) Management official. (1) The term

management official includes:

(i) A director;

(ii) An advisory or honorary director

of a depository institution with total

assets of $100 million or more;

(iii) A senior executive officer as that

term is defined in 12 CFR 225.71(a);

(iv) A branch manager;

(v) A trustee of a depository

organization under the control of

trustees; and

(vi) Any person who has a

representative or nominee, as defined in

paragraph (p) of this section, serving in

any of the capacities in this paragraph

(l) (1).

(2) The term management official

does not include:

(i) A person whose management

functions relate exclusively to the

business of retail merchandising or

manufacturing;

(ii) A person whose management

functions relate principally to a foreign

commercial bank’s business outside the

United States; or

(iii) A person described in the

provisos of section 202(4) of the

Interlocks Act (referring to an officer of

a State-chartered savings bank,

cooperative bank, or trust company that

neither makes real estate mortgage loans

nor accepts savings).

(m) Office means a principal or

branch office of a depository institution

located in the United States. Office does

not include a representative office of a

foreign commercial bank, an electronic

terminal, a loan production office.

(n) Person means a natural person,

corporation, or other business entity.

(o) Relevant metropolitan statistical

area (RMSA) means an MSA, a primary

MSA, or a consolidated MSA that is not

comprised of designated Primary MSAs

to the extent that these terms are

defined and applied by the Office of

Management and Budget.

(p) Representative or nominee means

a natural person who serves as a

management official and has an

obligation to act on behalf of another

person with respect to management

responsibilities. The Board will find

that a person has an obligation to act on

behalf of another person only if the first

person has an agreement, express or

implied, to act on behalf of the second

person with respect to management

responsibilities. The Board will

determine, after giving the affected

persons an opportunity to respond,

whether a person is a representative or

nominee.

(q) Total assets. (1) The term total

assets means assets measured on a

consolidated basis and reported in the

most recent fiscal year-end Consolidated

Report of Condition and Income.

(2) The term total assets does not

include:

(i) Assets of a diversified savings and

loan holding company as defined by

section 10(a)(1)(F) of the Home Owners’

Loan Act (12 U.S.C. 1467a(a)(1)(F))

other than the assets of its depository

institution affiliate;

(ii) Assets of a bank holding company

that is exempt from the prohibitions of

section 4 of the Bank Holding Company

Act of 1956 pursuant to an order issued

under section 4(d) of that Act (12 U.S.C.

1843(d)) other than the assets of its

depository institution affiliate; or

(iii) Assets of offices of a foreign

commercial bank other than the assets

of its United States branch or agency.

(r) United States means the United

States of America, any State or territory

of the United States of America, the

District of Columbia, Puerto Rico,

Guam, American Samoa, and the Virgin

Islands.

§ 212.3 Prohibitions.

(a) Community. A management

official of a depository organization may

not serve at the same time as a

management official of an unaffiliated

depository organization if the

depository organizations in question (or

a depository institution affiliate thereof)

have offices in the same community.

(b) RMSA. A management official of a

depository organization may not serve at

the same time as a management official

of an unaffiliated depository

organization if the depository

organizations in question (or a

depository institution affiliate thereof)

have offices in the same RMSA and each

depository organization has total assets

of $20 million or more.

(c) Major assets. A management

official of a depository organization

with total assets exceeding $1 billion (or

any affiliate thereof) may not serve at

the same time as a management official

of an unaffiliated depository

organization with total assets exceeding

$500 million (or any affiliate thereof),

regardless of the location of the two

depository organizations.

§ 212.4 Interlocking relationships

permitted by statute.

The prohibitions of § 212.3 do not

apply in the case of any one or more of
Federal Register / Vol. 60, No. 250 / Friday, December 29, 1995 / Proposed Rules 67435

the following organizations or to a

subsidiary thereof:

(a) A depository organization that has

been placed formally in liquidation, or

which is in the hands of a receiver,

conservator, or other official exercising

a similar function;

(b) A corporation operating under

section 25 or section 25A of the Federal

Reserve Act (12 U.S.C. 601 et seq. and

12 U.S.C. 611 et seq., respectively) (Edge

Corporations and Agreement

Corporations);

(c) A credit union being served by a

management official of another credit

union;

(d) A depository organization that

does not do business within the United

States except as an incident to its

activities outside the United States;

(e) A State-chartered savings and loan

guaranty corporation;

(f) A Federal Home Loan Bank or any

other bank organized solely to serve

depository institutions (a bankers’ bank)

or solely for the purpose of providing

securities clearing services and services

related thereto for depository

institutions and securities companies;

(g) A depository organization that is

closed or is in danger of closing as

determined by the appropriate Federal

depository institutions regulatory

agency and is acquired by another

depository organization. This exemption

lasts for five years, beginning on the

date the depository organization is

acquired; and

(h)(1) A diversified savings and loan

holding company (as defined in section

10(a)(1)(F) of the Home Owners’ Loan

Act (12 U.S.C. 1467a(a)(1)(F)) with

respect to the service of a director of

such company who also is a director of

an unaffiliated depository organization

if:

(i) Both the diversified savings and

loan holding company and the

unaffiliated depository organization

notify their appropriate Federal

depository institutions regulatory

agency at least 60 days before the dual

service is proposed to begin; and

(ii) The appropriate regulatory agency

does not disapprove the dual service

before the end of the 60-day period.

(2) The Board may disapprove a

notice of proposed service if it finds

that:

(i) The service cannot be structured or

limited so as to preclude an

anticompetitive effect in financial

services in any part of the United States;

(ii) The service would lead to

substantial conflicts of interest or unsafe

or unsound practices; or

(iii) The notificant failed to furnish all

the information required by the Board.

(3) The Board may require that any

interlock permitted under this

paragraph (h) be terminated if a change

in circumstances occurs with respect to

one of the interlocked depository

organizations that would have provided

a basis for disapproval of the interlock

during the notice period.

§ 212.5 Regulatory Standards exemption.

(a) Criteria. The Board may permit an

interlock that otherwise would be

prohibited by the Interlocks Act and

§ 212.3 if:

(1) The board of directors of the

depository organization (or the

organizers of a depository organization

being formed) that seeks the exemption

provides a resolution to the Board

certifying that the organization, after the

exercise of reasonable efforts, is unable

to locate any other candidate from the

community or RMSA, as appropriate,

who:

(i) Possesses the level of expertise

required by the depository organization

and who is not prohibited from service

by the Interlocks Act; and

(ii) Is willing to serve as a

management official; and

(2) The Board, after reviewing an

application submitted by the depository

organization seeking the exemption,

determines that:

(i) The management official is critical

to the safe and sound operations of the

affected depository organization; and

(ii) Service by the management

official will not produce an

anticompetitive effect with respect to

the depository organization.

(b) Presumptions. The Board applies

the following presumptions when

reviewing any application for a

Regulatory Standards exemption:

(1) An interlock has no

anticompetitive effect if it involves

depository institutions that, if merged,

would not cause the post-merger

Herfindahl-Hirschman Index (HHI) to

exceed 1800 and would not cause the

HHI to increase by more than 200

points. This presumption does not

apply to institutions subject to the major

assets prohibition of § 212.3(c).

(2) A proposed management official is

critical to the safe and sound operations

of a depository institution if the official

is approved by the Board to serve as a

director or senior executive officer of

the institution pursuant to 12 CFR

225.71 and the institution had operated

for less than two years, was not in

compliance with minimum capital

requirements, or otherwise was in a

‘‘troubled condition’’ as defined in 12

CFR 225.71 at the time the service under

that section was approved.

(c) Duration of interlock. An interlock

permitted under this section may

continue until the Board notifies the

affected organizations otherwise. The

Board may require termination of any

interlock permitted under this section if

the Board concludes, after giving the

affected persons the opportunity to

respond, that the determinations under

paragraph (a)(2) of this section no longer

may be made.

§ 212.6 Management Consignment

exemption.

(a) Criteria. The Board may permit an

interlock that otherwise would be

prohibited by the Interlocks Act and

§ 212.3 if the Board, after reviewing an

application submitted by the depository

organization seeking an exemption,

determines that the interlock would:

(1) Improve the provision of credit to

low- and moderate-income areas;

(2) Increase the competitive position

of a minority- or woman-owned

depository organization;

(3) Strengthen the management of a

depository institution that has been

chartered for less than two years at the

time an application is filed under this

part; or

(4) Strengthen the management of a

depository institution that is in an

unsafe or unsound condition as

determined by the Board on a case-bycase basis.

(b) Presumptions. The Board applies

the following presumptions in

reviewing any application for a

Management Consignment exemption:

(1) A proposed management official is

capable of strengthening the

management of a depository institution

described in paragraph (a)(3) of this

section if that official is approved by the

Board to serve as a director or senior

executive officer of that institution

pursuant to 12 CFR 225.71 and the

institution had operated for less than

two years at the time the service was

approved; and

(2) A proposed management official is

capable of strengthening the

management of a depository institution

described in paragraph (a)(4) of this

section if the official is approved by the

Board to serve as a director or senior

executive officer of the institution

pursuant to 12 CFR 225.71 and the

institution was not in compliance with

minimum capital requirements or

otherwise was in a ‘‘troubled condition’’

as defined under 12 CFR 225.71 at the

time service was approved.

(c) Duration of interlock. An interlock

granted under this section may continue

for a period of two years from the date

of approval. The Board may extend this

period for one additional two-year
67436 Federal Register / Vol. 60, No. 250 / Friday, December 29, 1995 / Proposed Rules

period if the depository organization

applies for an extension at least 30 days

before the current exemption expires

and satisfies one of the criteria specified

in paragraph (a) of this section. The

provisions set forth in paragraph (b) of

this section also apply to applications

for extensions.

§ 212.7 Change in circumstances.

(a) Termination. A management

official shall terminate his or her service

or apply for an exemption to the

Interlocks Act if a change in

circumstances causes the service to

become prohibited under that Act. A

change in circumstances may include,

but is not limited to, an increase in asset

size of an organization, a change in the

delineation of the RMSA or community,

the establishment of an office, an

acquisition, a merger, a consolidation,

or any reorganization of the ownership

structure of a depository organization

that causes a previously permissible

interlock to become prohibited.

(b) Transition period. A management

official described in paragraph (a) of this

section may continue to serve the state

member bank or bank holding company

involved in the interlock for 15 months

following the date of the change in

circumstances. The Board may shorten

this period under appropriate

circumstances.

§ 212.8 Enforcement.

Except as noted in this section, the

Board administers and enforces the

Interlocks Act with respect to state

member banks, bank holding

companies, and affiliates of either, and

may refer any case of a prohibited

interlocking relationship involving

these institutions to the Attorney

General of the United States to enforce

compliance with the Interlocks Act and

this part. If an affiliate of a state member

bank or a bank holding company is

subject to the primary regulation of

another Federal depository organization

supervisory agency, then the Board does

not administer and enforce the

Interlocks Act with respect to that

affiliate.

§ 212.9 Effect of Interlocks Act on Clayton

Act.

The Board regards the provisions of

the first three paragraphs of section 8 of

the Clayton Act (15 U.S.C. 19) to have

been supplanted by the revised and

more comprehensive prohibitions on

management official interlocks between

depository organizations in the

Interlocks Act.

Dated: December 14, 1995.

William W. Wiles,

Secretary of the Board.

Federal Deposit Insurance Corporation

12 CFR CHAPTER III

Authority and Issuance

For the reasons set forth in the joint

preamble, pursuant to its authority

under section 209 of the Depository

Institution Management Interlocks Act

(12 U.S.C. 3207), the Board of Directors

of the FDIC proposes to revise part 348

of chapter III of title 12 of the Code of

Federal Regulations to read as follows:

PART 348—MANAGEMENT OFFICIAL

INTERLOCKS

Sec.

348.1 Authority, purpose, and scope.

348.2 Definitions.

348.3 Prohibitions.

348.4 Interlocking relationships permitted

by statute.

348.5 Regulatory Standards exemption.

348.6 Management Consignment

exemption.

348.7 Change in circumstances.

348.8 Enforcement.

Authority: 12 U.S.C. 3207, 12 U.S.C.

1823(k).

§ 348.1 Authority, purpose, and scope.

(a) Authority. This part is issued

under the provisions of the Depository

Institution Management Interlocks Act

(Interlocks Act) (12 U.S.C. 3201 et seq.),

as amended.

(b) Purpose. The purpose of the

Interlocks Act and this part is to foster

competition by generally prohibiting a

management official from serving two

nonaffiliated depository organizations

in situations where the management

interlock likely would have an

anticompetitive effect.

(c) Scope. This part applies to

management officials of insured

nonmember banks and their affiliates.

§ 348.2 Definitions.

For purposes of this part, the

following definitions apply:

(a) Affiliate. (1) The term affiliate has

the meaning given in section 202 of the

Interlocks Act (12 U.S.C. 3201). For

purposes of that section, shares held by

an individual include shares held by

members of his or her immediate family.

‘‘Immediate family’’ includes spouse,

mother, father, child, grandchild, sister,

brother or any of their spouses, whether

or not any of their shares are held in

trust.

(2) For purposes of section 202(3)(B)

of the Interlocks Act (12 U.S.C.

3201(3)(B)), an affiliate relationship

involving an insured nonmember bank

based on common ownership does not

exist if the FDIC determines, after giving

the affected persons the opportunity to

respond, that the asserted affiliation was

established in order to avoid the

prohibitions of the Interlocks Act and

does not represent a true commonality

of interest between the depository

organizations. In making this

determination, the FDIC considers,

among other things, whether a person,

including members of his or her

immediate family whose shares are

necessary to constitute the group, owns

a nominal percentage of the shares of

one of the organizations and the

percentage is substantially

disproportionate with that person’s

ownership of shares in the other

organization.

(b) Anticompetitive effect means a

monopoly or substantial lessening of

competition.

(c) Area median income means:

(1) The median family income for the

metropolitan statistical area (MSA), if a

depository organization is located in an

MSA; or

(2) The statewide nonmetropolitan

median family income, if a depository

organization is located outside an MSA.

(d) Community means city, town, or

village, and contiguous or adjacent

cities, towns, or villages.

(e) Contiguous or adjacent cities,

towns, or villages means cities, towns,

or villages whose borders touch each

other or whose borders are within 10

road miles of each other at their closest

points. The property line of an office

located in an unincorporated city, town,

or village is the boundary line of that

city, town, or village for the purpose of

this definition.

(f) Critical means important to

restoring or maintaining a depository

organization’s safe and sound

operations.

(g) Depository holding company

means a bank holding company or a

savings and loan holding company (as

more fully defined in section 202 of the

Interlocks Act (12 U.S.C. 3201)) having

its principal office located in the United

States.

(h) Depository institution means a

commercial bank (including a private

bank), a savings bank, a trust company,

a savings and loan association, a

building and loan association, a

homestead association, a cooperative

bank, an industrial bank, or a credit

union, chartered under the laws of the

United States and having a principal

office located in the United States.

Additionally, a United States office,

including a branch or agency, of a

foreign commercial bank is a depository

institution.
Federal Register / Vol. 60, No. 250 / Friday, December 29, 1995 / Proposed Rules 67437

(i) Depository institution affiliate

means a depository institution that is an

affiliate of a depository organization.

(j) Depository organization means a

depository institution or a depository

holding company.

(k) Low- and moderate-income areas

means areas where the median family

income is less than 100 percent of the

area median income.

(l) Management official. (1) The term

management official includes:

(i) A director;

(ii) An advisory or honorary director

of a depository institution with total

assets of $100 million or more;

(iii) A senior executive officer as that

term is defined in 12 CFR 303.14(a)(3);

(iv) A branch manager;

(v) A trustee of a depository

organization under the control of

trustees; and

(vi) Any person who has a

representative or nominee serving in

any of the capacities in this paragraph

(l)(1).

(2) The term management official

does not include:

(i) A person whose management

functions relate exclusively to the

business of retail merchandising or

manufacturing;

(ii) A person whose management

functions relate principally to the

business outside the United States of a

foreign commercial bank; or

(iii) A person described in the

provisos of section 202(4) of the

Interlocks Act (12 U.S.C. 3201(4))

(referring to an officer of a Statechartered savings bank, cooperative

bank, or trust company that neither

makes real estate mortgage loans nor

accepts savings).

(m) Office means a principal or

branch office of a depository institution

located in the United States. Office does

not include a representative office of a

foreign commercial bank, an electronic

terminal, or a loan production office.

(n) Person means a natural person,

corporation, or other business entity.

(o) Relevant metropolitan statistical

area (RMSA) means an MSA, a primary

MSA, or a consolidated MSA that is not

comprised of designated Primary MSAs

to the extent that these terms are

defined and applied by the Office of

Management and Budget.

(p) Representative or nominee means

a natural person who serves as a

management official and has an

obligation to act on behalf of another

person with respect to management

responsibilities. The FDIC will find that

a person has an obligation to act on

behalf of another person only if the first

person has an agreement, express or

implied, to act on behalf of the second

person with respect to management

responsibilities. The FDIC will

determine, after giving the affected

persons an opportunity to respond,

whether a person is a representative or

nominee.

(q) Total assets. (1) The term total

assets includes assets measured on a

consolidated basis and reported in the

most recent fiscal year-end Consolidated

Report of Condition and Income.

(2) The term total assets does not

include:

(i) Assets of a diversified savings and

loan holding company as defined by

section 10(a)(1)(F) of the Home Owners’

Loan Act (12 U.S.C. 1467a(a)(1)(F))

other than the assets of its depository

institution affiliate;

(ii) Assets of a bank holding company

that is exempt from the prohibitions of

section 4 of the Bank Holding Company

Act of 1956 pursuant to an order issued

under section 4(d) of that Act (12 U.S.C.

1843(d)) other than the assets of its

depository institution affiliate; or

(iii) Assets of offices of a foreign

commercial bank other than the assets

of its United States branch or agency.

(r) United States means the United

States of America, any State or territory

of the United States of America, the

District of Columbia, Puerto Rico,

Guam, American Samoa, and the Virgin

Islands.

§ 348.3 Prohibitions.

(a) Community. A management

official of a depository organization may

not serve at the same time as a

management official of an unaffiliated

depository organization if the

depository organizations in question (or

a depository institution affiliate thereof)

have offices in the same community.

(b) RMSA. A management official of a

depository organization may not serve at

the same time as a management official

of an unaffiliated depository

organization if the depository

organizations in question (or a

depository institution affiliate thereof)

have offices in the same RMSA and each

depository organization has total assets

of $20 million or more.

(c) Major assets. A management

official of a depository organization

with total assets exceeding $1 billion (or

any affiliate thereof) may not serve at

the same time as a management official

of an unaffiliated depository

organization with total assets exceeding

$500 million (or any affiliate thereof),

regardless of the location of the two

depository organizations.

§ 348.4 Interlocking relationships

permitted by statute.

The prohibitions of § 348.3 do not

apply in the case of any one or more of

the following organizations or to a

subsidiary thereof:

(a) A depository organization that has

been placed formally in liquidation, or

which is in the hands of a receiver,

conservator, or other official exercising

a similar function;

(b) A corporation operating under

section 25 or section 25A of the Federal

Reserve Act (12 U.S.C. 601 et seq. and

12 U.S.C. 611 et seq., respectively) (Edge

Corporations and Agreement

Corporations);

(c) A credit union being served by a

management official of another credit

union;

(d) A depository organization that

does not do business within the United

States except as an incident to its

activities outside the United States;

(e) A State-chartered savings and loan

guaranty corporation;

(f) A Federal Home Loan bank or any

other bank organized solely to serve

depository institutions (a bankers’ bank)

or solely for the purpose of providing

securities clearing services and services

related thereto for depository

institutions and securities companies;

(g) A depository organization that is

closed or is in danger of closing as

determined by the appropriate Federal

depository institutions regulatory

agency and is acquired by another

depository organization. This exemption

lasts for five years, beginning on the

date the depository organization is

acquired;

(h) A savings association whose

acquisition has been authorized on an

emergency basis in accordance with

section 13(k) of the Federal Deposit

Insurance Act (12 U.S.C. 1823(k)) with

resulting dual service by a management

official that would otherwise be

prohibited under the Interlocks Act

which may continue for up to 10 years

from the date of the acquisition

provided that the FDIC has given its

approval for the continuation of such

service; and

(i)(1) A diversified savings and loan

holding company (as defined in section

10(a)(1)(F) of the Home Owners’ Loan

Act (12 U.S.C. 1467a(a)(1)(F)) with

respect to the service of a director of

such company who is also a director of

an unaffiliated depository organization

if:

(i) Both the diversified savings and

loan holding company and the

unaffiliated depository organization

notify their appropriate Federal

depository institutions regulatory

agency at least 60 days before the dual

service is proposed to begin; and

(ii) The appropriate regulatory agency

does not disapprove the dual service

before the end of the 60-day period.
67438 Federal Register / Vol. 60, No. 250 / Friday, December 29, 1995 / Proposed Rules

(2) The FDIC may disapprove a notice

of proposed service if it finds that:

(i) The service cannot be structured or

limited so as to preclude an

anticompetitive effect in financial

services in any part of the United States;

(ii) The service would lead to

substantial conflicts of interest or unsafe

or unsound practices; or

(iii) The notificant failed to furnish all

the information required by the FDIC.

(3) The FDIC may require that any

interlock permitted under this

paragraph (h) be terminated if a change

in circumstances occurs with respect to

one of the interlocked depository

organizations that would have provided

a basis for disapproval of the interlock

during the notice period.

§ 348.5 Regulatory Standards exemption.

(a) Criteria. The FDIC may permit an

interlock that otherwise would be

prohibited by the Interlocks Act and

§ 348.3 if:

(1) The board of directors of the

depository organization (or the

organizers of a depository organization

being formed) that seeks the exemption

provides a resolution to the FDIC

certifying that the organization, after the

exercise of reasonable efforts, is unable

to locate any other candidate from the

community or RMSA, as appropriate,

who:

(i) Possesses the level of expertise

required by the depository organization

and who is not prohibited from service

by the Interlocks Act; and

(ii) Is willing to serve as a

management official; and

(2) The FDIC, after reviewing an

application submitted by the depository

organization seeking the exemption,

determines that:

(i) The management official is critical

to the safe and sound operations of the

affected depository organization; and

(ii) Service by the management

official will not produce an

anticompetitive effect with respect to

the depository organization.

(b) Presumptions. The FDIC applies

the following presumptions when

reviewing any application for a

Regulatory Standards exemption:

(1) An interlock has no

anticompetitive effect if it involves

depository institutions that, if merged,

would not cause the post-merger

Herfindahl-Hirschman Index (HHI) to

exceed 1800 and would not cause the

HHI to increase by more than 200

points. This presumption shall not

apply to institutions subject to the major

assets prohibition of § 348.3(c).

(2) A proposed management official is

critical to the safe and sound operations

of a depository institution if that official

is approved by the FDIC to serve as a

director or a senior executive officer of

that institution pursuant to 12 CFR

303.14 and the institution had operated

for less than two years, was not in

compliance with minimum capital

requirements, or otherwise was in a

‘‘troubled condition’’ as defined by 12

CFR 303.14(a)(4) at the time the service

under that section was approved.

(c) Duration of interlock. An interlock

permitted under this section may

continue until the FDIC notifies the

affected organizations otherwise. The

FDIC may require termination of any

interlock permitted under this section if

the FDIC concludes, after giving the

affected persons the opportunity to

respond, that the determinations under

paragraph (a)(2) of this section no longer

may be made.

§ 348.6 Management Consignment

exemption.

(a) Criteria. The FDIC may permit an

interlock that otherwise would be

prohibited by the Interlocks Act and

§ 348.3 if the FDIC, after reviewing an

application submitted by the depository

organization seeking an exemption,

determines that the interlock would:

(1) Improve the provision of credit to

low- and moderate-income areas;

(2) Increase the competitive position

of a minority- or woman-owned

depository organization;

(3) Strengthen the management of a

depository institution that has been

chartered for less than two years at the

time an application is filed under this

part; or

(4) Strengthen the management of a

depository institution that is in an

unsafe or unsound condition as

determined by the FDIC on a case-bycase basis.

(b) Presumptions. The FDIC applies

the following presumptions when

reviewing any application for a

Management Consignment exemption:

(1) A proposed management official is

capable of strengthening the

management of a depository institution

described in paragraph (a)(3) of this

section if that official is approved by the

FDIC to serve as a director or a senior

executive officer of that institution

pursuant to 12 CFR 303.14 and the

institution had operated for less than

two years at the time the service under

12 CFR 303.14 was approved; and

(2) A proposed management official is

capable of strengthening the

management of a depository institution

described in paragraph (a)(4) of this

section if that official is approved by the

FDIC to serve as a director or a senior

executive officer of that institution

pursuant to 12 CFR 303.14 and the

institution was not in compliance with

minimum capital requirements or

otherwise was in a ‘‘troubled condition’’

as defined under 12 CFR 303.14 at the

time service under that section was

approved.

(c) Duration of interlock. An interlock

granted under this section may continue

for a period of two years from the date

of approval. The FDIC may extend this

period for one additional two-year

period if the depository organization

applies for an extension at least 30 days

before the current exemption expires

and satisfies one of the criteria specified

in paragraph (a) of this section. The

provisions set forth in paragraph (b) of

this section also apply to applications

for extensions.

§ 348.7 Change in circumstances.

(a) Termination. A management

official shall terminate his or her service

or apply for an exemption to the

Interlocks Act if a change in

circumstances causes the service to

become prohibited under that Act. A

change in circumstances may include,

but is not limited to, an increase in asset

size of an organization, a change in the

delineation of the RMSA or community,

the establishment of an office, an

acquisition, a merger, a consolidation,

or any reorganization of the ownership

structure of a depository organization

that causes a previously permissible

interlock to become prohibited.

(b) Transition period. A management

official described in paragraph (a) of this

section may continue to serve the

insured nonmember bank involved in

the interlock for 15 months following

the date of the change in circumstances.

The FDIC may shorten this period under

appropriate circumstances.

§ 348.8 Enforcement.

Except as noted in this section, the

FDIC administers and enforces the

Interlocks Act with respect to insured

nonmember banks and their affiliates

and may refer any case of a prohibited

interlocking relationship involving

these institutions to the Attorney

General of the United States to enforce

compliance with the Interlocks Act and

this part. If an affiliate of an insured

nonmember bank is subject to the

primary regulation of another federal

depository organization supervisory

agency, then the FDIC does not

administer and enforce the Interlocks

Act with respect to that affiliate.

By order of the Board of Directors.

Dated at Washington, DC, this 12th day of

December, 1995.
Federal Register / Vol. 60, No. 250 / Friday, December 29, 1995 / Proposed Rules 67439

Federal Deposit Insurance Corporation.

Jerry L. Langley,

Executive Secretary.

Office of Thrift Supervision

12 CFR CHAPTER V

Authority and Issuance

For the reasons set out in the joint

preamble, the OTS proposes to revise

part 563f of chapter V of title 12 of the

Code of Federal Regulations to read as

follows:

PART 563f—MANAGEMENT OFFICIAL

INTERLOCKS

Sec.

563f.1 Authority, purpose, and scope.

563f.2 Definitions.

563f.3 Prohibitions.

563f.4 Interlocking relationships permitted

by statute.

563f.5 Regulatory Standards exemption.

563f.6 Management Consignment

exemption.

563f.7 Change in circumstances.

563f.8 Enforcement.

563f.9 Interlocking relationships permitted

pursuant to Federal Deposit Insurance

Act.

Authority: 12 U.S.C. 3201–3208.

§ 563f.1 Authority, purpose, and scope.

(a) Authority. This part is issued

under the provisions of the Depository

Institution Management Interlocks Act

(Interlocks Act) (12 U.S.C. 3201 et seq.),

as amended.

(b) Purpose. The purpose of the

Interlocks Act and this part is to foster

competition by generally prohibiting a

management official from serving two

nonaffiliated depository organizations

in situations where the management

interlock likely would have an

anticompetitive effect.

(c) Scope. This part applies to

management officials of savings

associations, savings and loan holding

companies, and affiliates of either.

§ 563f.2 Definitions.

For purposes of this part, the

following definitions apply:

(a) Affiliate. (1) The term affiliate has

the meaning given in section 202 of the

Interlocks Act (12 U.S.C. 3201). For

purposes of that section, shares held by

an individual include shares held by

members of his or her immediate family.

‘‘Immediate family’’ includes spouse,

mother, father, child, grandchild, sister,

brother, or any of their spouses, whether

or not any of their shares are held in

trust.

(2) For purposes of section 202(3)(B)

of the Interlocks Act (12 U.S.C.

3201(3)(B)), an affiliate relationship

involving a savings association or

savings and loan holding company

based on common ownership does not

exist if the OTS determines, after giving

the affected persons the opportunity to

respond, that the asserted affiliation was

established in order to avoid the

prohibitions of the Interlocks Act and

does not represent a true commonality

of interest between the depository

organizations. In making this

determination, the OTS considers,

among other things, whether a person,

including members of his or her

immediate family, whose shares are

necessary to constitute the group owns

a nominal percentage of the shares of

one of the organizations and the

percentage is substantially

disproportionate with that person’s

ownership of shares in the other

organization.

(b) Anticompetitive effect means a

monopoly or substantial lessening of

competition.

(c) Area median income means:

(1) The median family income for the

metropolitan statistical area (MSA), if a

depository organization is located in an

MSA; or

(2) The statewide nonmetropolitan

median family income, if a depository

organization is located outside an MSA.

(d) Community means city, town, or

village, and contiguous or adjacent

cities, towns, or villages.

(e) Contiguous or adjacent cities,

towns, or villages means cities, towns,

or villages whose borders touch each

other or whose borders are within 10

road miles of each other at their closest

points. The property line of an office

located in an unincorporated city, town,

or village is the boundary line of that

city, town, or village for the purpose of

this definition.

(f) Critical means important to

restoring or maintaining a depository

organization’s safe and sound

operations.

(g) Depository holding company

means a bank holding company or a

savings and loan holding company (as

more fully defined in section 202 of the

Interlocks Act (12 U.S.C. 3201)) having

its principal office located in the United

States.

(h) Depository institution means a

commercial bank (including a private

bank), a savings bank, a trust company,

a savings and loan association, a

building and loan association, a

homestead association, a cooperative

bank, an industrial bank, or a credit

union, chartered under the laws of the

United States and having a principal

office located in the United States.

Additionally, a United States office,

including a branch or agency, of a

foreign commercial bank is a depository

institution.

(i) Depository institution affiliate

means a depository institution that is an

affiliate of a depository organization.

(j) Depository organization means a

depository institution or a depository

holding company.

(k) Low- and moderate-income areas

means areas where the median family

income is less than 100 percent of the

area median income.

(l) Management official. (1) The term

management official includes:

(i) A director;

(ii) An advisory or honorary director

of a depository institution with total

assets of $100 million or more;

(iii) A senior executive officer as that

term is defined in 12 CFR 574.9(a)(2);

(iv) A branch manager;

(v) A trustee of a depository

organization under the control of

trustees; and

(vi) Any person who has a

representative or nominee serving in

any of the capacities in this paragraph

(l)(1).

(2) The term management official

does not include:

(i) A person whose management

functions relate exclusively to the

business of retail merchandising or

manufacturing;

(ii) A person whose management

functions relate principally to the

business outside the United States of a

foreign commercial bank; or

(iii) A person described in the

provisos of section 202(4) of the

Interlocks Act (12 U.S.C. 3201(4))

(referring to an officer of a Statechartered savings bank, cooperative

bank, or trust company that neither

makes real estate mortgage loans nor

accepts savings).

(m) Office means a principal or

branch office of a depository institution

located in the United States. Office does

not include a representative office of a

foreign commercial bank, an electronic

terminal, or a loan production office.

(n) Person means a natural person,

corporation, or other business entity.

(o) Relevant metropolitan statistical

area (RMSA) means an MSA, a primary

MSA, or a consolidated MSA that is not

comprised of designated Primary MSAs

to the extent that these terms are

defined and applied by the Office of

Management and Budget.

(p) Representative or nominee means

a natural person who serves as a

management official and has an

obligation to act on behalf of another

person with respect to management

responsibilities. The OTS will find that

a person has an obligation to act on

behalf of another person only if the first

person has an agreement, express or

implied, to act on behalf of the second
67440 Federal Register / Vol. 60, No. 250 / Friday, December 29, 1995 / Proposed Rules

person with respect to management

responsibilities. The OTS will

determine, after giving the affected

persons an opportunity to respond,

whether a person is a representative or

nominee.

(q) Savings association means:

(i) Any Federal savings association (as

defined in section 3(b)(2) of the Federal

Deposit Insurance Act (12 U.S.C.

1813(b)(2));

(ii) Any state savings association (as

defined in section 3(b)(3) of the Federal

Deposit Insurance Act (12 U.S.C.

1813(b)(3)) the deposits of which are

insured by the Federal Deposit

Insurance Corporation; and

(iii) Any corporation (other than a

bank as defined in section 3(a)(1) of the

Federal Deposit Insurance Act (12

U.S.C. 1813(a)(1)) the deposits of which

are insured by the Federal Deposit

Insurance Corporation, that the Board of

Directors of the Federal Deposit

Insurance Corporation and the Director

of the Office of Thrift Supervision

jointly determine to be operating in

substantially the same manner as a

savings association.

(r) Total assets. (1) The term total

assets means assets measured on a

consolidated basis and reported in the

most recent fiscal year-end Consolidated

Report of Condition and Income.

(2) The term total assets does not

include:

(i) Assets of a diversified savings and

loan holding company as defined by

section 10(a)(1)(F) of the Home Owners’

Loan Act (12 U.S.C. 1467a(a)(1)(F))

other than the assets of its depository

institution affiliate;

(ii) Assets of a bank holding company

that is exempt from the prohibitions of

section 4 of the Bank Holding Company

Act of 1956 pursuant to an order issued

under section 4(d) of that Act (12 U.S.C.

1843(d)) other than the assets of its

depository institution affiliate; or

(iii) Assets of offices of a foreign

commercial bank other than the assets

of its United States branch or agency.

(s) United States means the United

States of America, any State or territory

of the United States of America, the

District of Columbia, Puerto Rico,

Guam, American Samoa, and the Virgin

Islands.

§ 563f.3 Prohibitions.

(a) Community. A management

official of a depository organization may

not serve at the same time as a

management official of an unaffiliated

depository organization if the

depository organizations in question (or

a depository institution affiliate thereof)

have offices in the same community.

(b) RMSA. A management official of a

depository organization may not serve at

the same time as a management official

of an unaffiliated depository

organization if the depository

organizations in question (or a

depository institution affiliate thereof)

have offices in the same RMSA and each

depository organization has total assets

of $20 million or more.

(c) Major assets. A management

official of a depository organization

with total assets exceeding $1 billion (or

any affiliate thereof) may not serve at

the same time as a management official

of an unaffiliated depository

organization with total assets exceeding

$500 million (or any affiliate thereof),

regardless of the location of the two

depository organizations.

§ 563f.4 Interlocking relationships

permitted by statute.

The prohibitions of § 563f.3 do not

apply in the case of any one or more of

the following organizations or to a

subsidiary thereof:

(a) A depository organization that has

been placed formally in liquidation, or

which is in the hands of a receiver,

conservator, or other official exercising

a similar function;

(b) A corporation operating under

section 25 or section 25A of the Federal

Reserve Act (12 U.S.C. 601 et seq. and

12 U.S.C. 611 et seq., respectively) (Edge

Corporations and Agreement

Corporations);

(c) A credit union being served by a

management official of another credit

union;

(d) A depository organization that

does not do business within the United

States except as an incident to its

activities outside the United States;

(e) A State-chartered savings and loan

guaranty corporation;

(f) A Federal Home Loan Bank or any

other bank organized solely to serve

depository institutions (a bankers’ bank)

or solely for the purpose of providing

securities clearing services and services

related thereto for depository

institutions and securities companies;

(g) A depository organization that is

closed or is in danger of closing as

determined by the appropriate Federal

depository institutions regulatory

agency and is acquired by another

depository organization. This exemption

lasts for five years, beginning on the

date the depository organization is

acquired;

(h)(1) A diversified savings and loan

holding company (as defined in section

10(a)(1)(F) of the Home Owners’ Loan

Act (12 U.S.C. 1467a(a)(1)(F)) with

respect to the service of a director of

such company who also is a director of

an unaffiliated depository organization

if:

(i) Both the diversified savings and

loan holding company and the

unaffiliated depository organization

notify their appropriate Federal

depository institutions regulatory

agency at least 60 days before the dual

service is proposed to begin; and

(ii) The appropriate regulatory agency

does not disapprove the dual service

before the end of the 60-day period.

(2) The OTS may disapprove a notice

of proposed service if it finds that:

(i) The service cannot be structured or

limited so as to preclude an

anticompetitive effect in financial

services in any part of the United States;

(ii) The service would lead to

substantial conflicts of interest or unsafe

or unsound practices; or

(iii) The notificant failed to furnish all

the information required by the OTS.

(3) The OTS may require that any

interlock permitted under this

paragraph be terminated if a change in

circumstances occurs with respect to

one of the interlocked depository

organizations that would have provided

a basis for disapproval of the interlock

during the notice period; and

(i) Any savings association or any

savings and loan holding company (as

defined in section 10(a)(1)(D) of the

Home Owners’ Loan Act) which has

issued stock in connection with a

qualified stock issuance pursuant to

section 10(q) of such Act, except that

this paragraph (i) shall apply only with

regard to service by a single

management official of such savings

association or holding company, or any

subsidiary of such savings association or

holding company, by a single

management official of the savings and

loan holding company which purchased

the stock issued in connection with

such qualified stock issuance, and shall

apply only when the OTS has

determined that such service is

consistent with the purposes of the

Interlocks Act and the Home Owners’

Loan Act.

§ 563f.5 Regulatory Standards exemption.

(a) Criteria. The OTS may permit an

interlock that otherwise would be

prohibited by the Interlocks Act and

§ 563f.3 if:

(1) The board of directors of the

depository organization (or the

organizers of a depository organization

being formed) that seeks the exemption

provides a resolution to the OTS

certifying that the organization, after the

exercise of reasonable efforts, is unable

to locate any other candidate from the

community or RMSA, as appropriate,

who:
Federal Register / Vol. 60, No. 250 / Friday, December 29, 1995 / Proposed Rules 67441

(i) Possesses the level of expertise

required by the depository organization

and who is not prohibited from service

by the Interlocks Act; and

(ii) Is willing to serve as a

management official; and

(2) The OTS, after reviewing an

application submitted by the depository

organization seeking the exemption,

determines that:

(i) The management official is critical

to the safe and sound operations of the

affected depository organization; and

(ii) Service by the management

official will not produce an

anticompetitive effect with respect to

the depository organization.

(b) Presumptions. The OTS applies

the following presumptions when

reviewing any application for a

Regulatory Standards exemption:

(1) An interlock has no

anticompetitive effect if it involves

depository institutions that, if merged,

would not cause the post-merger

Herfindahl-Hirschman Index (HHI) to

exceed 1800 and would not cause the

HHI to increase by more than 200

points. This presumption shall not

apply to institutions subject to the major

assets prohibition of § 563f.3(c).

(2) A proposed management official is

critical to the safe and sound operations

of a depository institution if that official

is approved by the OTS to serve as a

director or senior executive officer of

that institution pursuant to 12 CFR

574.9 and the institution had operated

for less than two years, was not in

compliance with minimum capital

requirements, or otherwise was in a

‘‘troubled condition’’ as defined in 12

CFR 574.9 at the time the service under

that section was approved.

(c) Duration of interlock. An interlock

permitted under this section may

continue until the OTS notifies the

affected organizations otherwise. The

OTS may require termination of any

interlock permitted under this section if

the OTS concludes, after giving the

affected persons the opportunity to

respond, that the determinations under

paragraph (a)(2) of this section no longer

may be made.

§ 563f.6 Management Consignment

exemption.

(a) Criteria. The OTS may permit an

interlock that otherwise would be

prohibited by the Interlocks Act and

§ 563f.3 if the OTS, after reviewing an

application submitted by the depository

organization seeking an exemption,

determines that the interlock would:

(1) Improve the provision of credit to

low- and moderate-income areas;

(2) Increase the competitive position

of a minority- or woman-owned

depository organization;

(3) Strengthen the management of a

depository institution that has been

chartered for less than three years at the

time an application is filed under this

part; or

(4) Strengthen the management of a

depository institution that is in an

unsafe or unsound condition as

determined by the OTS on a case-bycase basis.

(b) Presumptions. The OTS applies

the following presumptions when

reviewing any application for a

Management Consignment exemption:

(1) A proposed management official is

capable of strengthening the

management of a depository institution

described in paragraph (a)(3) of this

section if that official is approved by the

OTS to serve as a director or senior

executive officer of that institution

pursuant to 12 CFR 574.9 and the

institution had operated for less than

two years at the time the service under

12 CFR 574.9 was approved; and

(2) A proposed management official is

capable of strengthening the

management of a depository institution

described in paragraph (a)(4) of this

section if that official is approved by the

OTS to serve as a director or senior

executive officer of that institution

pursuant to 12 CFR 574.9 and the

institution was not in compliance with

minimum capital requirements or

otherwise was in a ‘‘troubled condition’’

as defined under 12 CFR 574.9 at the

time service under that section was

approved.

(c) Duration of interlock. An interlock

granted under this section may continue

for a period of two years from the date

of approval. The OTS may extend this

period for one additional two-year

period if the depository organization

applies for an extension at least 30 days

before the current exemption expires

and satisfies one of the criteria specified

in paragraph (a) of this section. The

provisions set forth in paragraph (b) of

this section also apply to applications

for extensions.

§ 563f.7 Change in circumstances.

(a) Termination. A management

official shall terminate his or her service

or apply for an exemption to the

Interlocks Act if a change in

circumstances causes the service to

become prohibited under that Act. A

change in circumstances may include,

but is not limited to, an increase in asset

size of an organization, a change in the

delineation of the RMSA or community,

the establishment of an office, an

acquisition, a merger, a consolidation,

or any reorganization of the ownership

structure of a depository organization

that causes a previously permissible

interlock to become prohibited.

(b) Transition period. A management

official described in paragraph (a) of this

section may continue to serve the

depository institution involved in the

interlock for 15 months following the

date of the change in circumstances.

The OTS may shorten this period under

appropriate circumstances.

§ 563f.8 Enforcement.

Except as noted in this section, the

OTS administers and enforces the

Interlocks Act with respect to savings

associations, savings and loan holding

companies, and affiliates of either, and

may refer any case of a prohibited

interlocking relationship involving

these institutions to the Attorney

General of the United States to enforce

compliance with the Interlocks Act and

this part. If an affiliate of a savings

association or savings and loan holding

company is subject to the primary

regulation of another Federal depository

organization supervisory agency, then

the OTS does not administer and

enforce the Interlocks Act with respect

to that affiliate.

§ 563f.9 Interlocking relationships

permitted pursuant to Federal Deposit

Insurance Act.

A management official or prospective

management official of a depository

organization may enter into an

otherwise prohibited interlocking

relationship with another depository

organization for a period of up to 10

years if such relationship is approved by

the Federal Deposit Insurance

Corporation pursuant to section

13(k)(1)(A)(v) of the Federal Deposit

Insurance Act, as amended (12 U.S.C.

1823(k)(1)(A)(v)).

Dated: December 13, 1995.

Jonathan L. Fiechter,

Acting Director.

[FR Doc. 95–30972 Filed 12–28–95; 8:45 am]

BILLING CODES 4810–33–P, 6210–01–P, 6714–01–P,

6720–01–P