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Home > News & Events > Inactive Financial Institution Letters 




Inactive Financial Institution Letters 


[Federal Register: December 29, 1995 (Volume 60, Number 250)]
[Proposed Rules]               
[Page 67423-67441]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[[Page 67423]]

_______________________________________________________________________

Part III

Department of the Treasury
Office of the Comptroller of the Currency

12 CFR Part 26

Federal Reserve System

12 CFR Part 212

Federal Deposit Insurance Corporation

12 CFR Part 348

Department of the Treasury
Office of Thrift Supervision

12 CFR Part 563f

_______________________________________________________________________


Management Official Interlocks; Proposed Rule

[[Page 67424]]

DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 26

[Docket No. 95-31]
RIN 1557-AB39

FEDERAL RESERVE BOARD

12 CFR Part 212

[Docket No. R-0907]

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 348

RIN 3064-AB71

DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Part 563f

[Docket No. 95-204]
RIN 1150-AA95

Management Official Interlocks

AGENCIES: Office of the Comptroller of the Currency, Treasury; Board of 
Governors of the Federal Reserve System; Federal Deposit Insurance 
Corporation; Office of Thrift Supervision, Treasury.

ACTION: Joint notice of proposed rulemaking.

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SUMMARY: The Office of the Comptroller of the Currency (OCC), Board of 
Governors of the Federal Reserve System (Board), Federal Deposit 
Insurance Corporation (FDIC), and Office of Thrift Supervision (OTS) 
(collectively, the agencies) propose to revise their rules regarding 
management interlocks. The proposal conforms the interlocks rules to 
recent statutory changes, modernizes and clarifies the rules, and 
reduces unnecessary regulatory burdens where feasible, consistent with 
statutory requirements.

DATES: Comments must be received by February 27, 1996.

ADDRESSES: Comments should be directed to:
    OCC: Office of the Comptroller of the Currency, Communications 
Division, 250 E Street, SW, Washington, DC 20219, Attention: Docket No. 
95-31. Comments will be available for public inspection and 
photocopying at the same location. In addition, comments may be sent by 
facsimile transmission to FAX number (202) 874-5274 or by internet mail 
to 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 Sec. 261.8 of the Board's Rules Regarding Availability 
of Information, 12 CFR 261.8.
    FDIC: Jerry L. Langley, Executive Secretary, Attention: Room F-402, 
Federal Deposit Insurance Corporation, 550 17th Street, NW, Washington, 
DC 20429. Comments may be delivered to room F-400, 1776 F Street, NW, 
Washington, DC 20429, on business days between 8:30 a.m. and 5:00 p.m. 
or sent by facsimile transmission to FAX number 202/898-3838. Internet: 
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\

    \1\ The National Credit Union Administration has participated in 
the interagency effort to revise the management interlocks 
regulations and intends to publish a separate Notice of Proposed 
Rulemaking revising 12 CFR part 711 in the near future.
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Summary of Statutory Changes

    The CDRI Act amended the Depository Institution Management 
Interlocks Act (12 U.S.C. 3201-3208) (Interlocks Act) by removing the 
agencies' broad authority to exempt otherwise impermissible interlocks 
and replacing it with the authority to exempt interlocks under more 
narrow circumstances. The CDRI Act also required a depository 
organization with a ``grandfathered'' interlock to apply for an 
extension of the grandfather period if the organization wanted to keep 
the interlock in place.\2\

    \2\ The agencies completed their review of requests for 
extensions by March 23, 1995, as directed by the statute. Therefore, 
the provision regarding extending the grandfather period is moot for 
purposes of this regulation. 

[[Page 67425]]

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    After the changes made by the CDRI Act, a person subject to the 
Interlocks Act's restrictions seeking an exemption from those 
restrictions must qualify either for a ``regulatory standards'' 
exemption (the Regulatory Standards exemption) or an exemption under a 
``management official consignment program'' (the Management Consignment 
exemption). An applicant seeking a Regulatory Standards exemption must 
submit a board resolution certifying that no other candidate from the 
relevant community has the necessary expertise to serve as a management 
official, is willing to serve, and is not otherwise prohibited by the 
Interlocks Act from serving. Before granting the exemption request, the 
appropriate agency must find that the individual is critical to the 
institution's safe and sound operations, that the interlock will not 
produce an anticompetitive effect, and that the management official 
meets any additional requirements imposed by the agency. Under the 
Management Consignment exemption, the appropriate agency may permit an 
interlock that otherwise would be prohibited by the Interlocks Act if 
the agency determines that the interlock would improve the provision of 
credit to low- and moderate-income areas, increase the competitive 
position of a minority- or woman-owned institution, or strengthen the 
management of a newly chartered institution or an institution that is 
in an unsafe or unsound condition. (See text following ``Management 
Consignment exemption'' in this Preamble for a discussion regarding 
interlocks involving newly chartered institutions or institutions that 
are in an unsafe or unsound condition.)
    The proposal reflects these statutory changes, and streamlines and 
clarifies the interlocks regulations in various respects. These changes 
are discussed in the text that follows. The agencies invite comments on 
all aspects of this proposal.

Discussion

    The following is a section-by-section discussion of the proposed 
revisions.

Authority, Purpose, and Scope

    This section in the agencies' current regulations identifies the 
Interlocks Act as the statutory authority for the management interlocks 
regulation. It also states that the purpose of the rules governing 
management interlocks is to foster competition between unaffiliated 
institutions. Finally, this section currently identifies the types of 
institutions to which each agency's regulation applies.
    The proposed rule restates these provisions and, in the OCC 
proposed rule, uses the term ``District bank'' to describe banks 
operating under the Code of Laws of the District of Columbia. (See 
definition of ``District bank'' at proposed Sec. 26.2(k).)

Definitions

    Each of the agencies' current regulations sets forth definitions of 
key terms used in the regulation.
    The proposed regulations change some of the current definitions. A 
discussion of the substantive differences between the current rules and 
proposals follows.

Anticompetitive Effect

    The current regulations neither use nor define the term 
``anticompetitive effect.''
    The proposed regulations define the term to mean ``a monopoly or 
substantial lessening of competition.'' This term is used in the 
Regulatory Standards exemption. Under that exemption, the appropriate 
agency may approve a request for an exemption to the Interlocks Act if, 
among other things, the agency finds that continuation of service by 
the management official does not produce an anticompetitive effect with 
respect to the affected institution. The statute does not define the 
term ``anticompetitive effect,'' nor does the legislative history to 
the CDRI Act point to a particular definition.
    The context of the Regulatory Standards exemption suggests, 
however, that the agencies should apply the term ``anticompetitive 
effect'' in a manner that permits interlocks that present no 
substantial lessening of competition. By prohibiting an interlock that 
would result in a monopoly or substantial lessening of competition, the 
proposed definition preserves the free flow of credit and other banking 
services that the Interlocks Act is designed to protect. Another 
benefit of the proposed definition is that it is familiar to the 
banking industry, given that it is derived from the Bank Merger Act (12 
U.S.C. 1828(c)). This enables the agencies to accomplish the 
legislative purpose of the Interlocks Act without imposing unnecessary 
regulatory burdens.

Area Median Income

    The current regulations do not use the term ``area median income,'' 
and, therefore, do not define this term.
    The proposed regulations define ``area median income'' as the 
median family income for the metropolitan statistical area (MSA) in 
which an institution is located or the statewide nonmetropolitan median 
family income if an institution is located outside an MSA. This term is 
used in the definition of ``low- and moderate-income areas,'' which in 
turn is used in the implementation of the Management Consignment 
exemption.

Contiguous or Adjacent Cities, Towns, or Villages

    The current regulations define ``adjacent cities, towns, or 
villages'' as cities, towns, or villages whose borders are within 10 
road miles from each other. They also define ``contiguous cities, 
towns, or villages'' as cities, towns, or villages whose borders touch. 
The statute and regulations apply these terms to prohibit interlocks 
involving small institutions that are located in contiguous or adjacent 
cities, towns, or villages.
    The proposed regulations combine these two definitions, given that 
contiguous cities, towns, or villages necessarily are within 10 miles 
of each other.

Critical

    The current regulations neither use nor define ``critical.''
    The proposed regulations define the term in connection with the 
Regulatory Standards exemption. Under that exemption, the appropriate 
agency must find that a proposed management official is critical to the 
safe and sound operations of the affected institution. 12 U.S.C. 
3207(b)(2)(A). Neither the statute nor its legislative history define 
``critical.''
    The agencies are concerned that a narrow interpretation of this 
term would nullify the Regulatory Standards exemption. If someone were 
``critical'' to the safe and sound operations of an institution only if 
the institution would fail but for the service of the person in 
question, the exemption would have little relevance because the 
standard would be practically impossible to meet. Given that Congress 
clearly intended for the Regulatory Standards exemption to permit 
interlocks under some circumstances, the question thus becomes how to 
define those circumstances.
    This proposal addresses the issue by stating that the agencies will 
consider a person to be critical to a depository organization if the 
person will play an important role in helping the institution either 
address current problems or maintain safe and sound operations going 
forward. The agencies believe that this approach is consistent with the 


[[Page 67426]]
legislative intent by insuring that only persons of demonstrated 
expertise and importance to the institution will be allowed to serve 
pursuant to a Regulatory Standards exemption.

Low- and Moderate-Income Areas

    The current regulations permit interlocks under certain 
circumstances involving a depository organization located ``in a low 
income or other economically depressed area.'' However, the current 
rules do not define ``low income'' or ``economically depressed.''
    Section 209(c)(1)(A) of the Interlocks Act (12 U.S.C. 
3207(c)(1)(A)) authorizes the appropriate agency to permit interlocks 
pursuant to the Management Consignment exemption if the agency 
determines that the proposed service would ``improve the provision of 
credit to low- and moderate-income areas.'' The proposed regulations 
define ``low- and moderate-income areas'' as areas where the median 
family income is less than 100 percent of the area median income. This 
definition is consistent with Title I, Subtitle A of the CDRI Act (the 
Community Development Banking and Financial Institutions Act of 1994) 
(12 U.S.C. 4701-4718), which, like the Management Consignment exemption 
affecting institutions in low- and moderate-income areas, is intended 
to assist the flow of credit into economically depressed areas. Section 
103(17) of the CDRI Act (12 U.S.C. 4702(17)) defines ``low income'' to 
mean not more than 80 percent of the area median income. The agencies 
believe that Congress, by using the term ``low- and moderate-income'' 
in the Management Consignment exemption, intended for that term to 
apply to an area where the median family income exceeds 80 percent of 
the median income for the area. The agencies have selected 100 percent 
of the area median income as the cutoff for defining ``low- and 
moderate-income areas'' because they believe that a higher threshold 
would permit interlocks that would not improve the provision of credit 
to low- and moderate-income areas.

Management Official

    The current regulations define ``management official'' to include 
an employee or officer ``with management functions'' (including a 
branch manager), a director, a trustee of an organization under the 
control of trustees, or any person who has a representative or nominee 
serving in such capacity. The definition excludes (1) a person whose 
management functions relate either exclusively to the business of 
retail merchandising or manufacturing or principally to business 
outside the United States of a foreign commercial bank and (2) a person 
excluded by section 202(4) of the Interlocks Act (12 U.S.C. 3201(4)).
    The proposed regulations adopt the definition of ``management 
official'' set forth in the current rules, except that the phrase ``an 
employee or officer with management functions'' is removed. It is 
replaced by the term ``senior executive officer'' as defined by each of 
the agencies in their regulations pertaining to the prior notice of 
changes in senior executive officers, which implement section 32 of the 
Federal Deposit Insurance Act (FDI Act) (12 U.S.C. 1831i) as added by 
section 914 of the Financial Institutions Reform, Recovery, and 
Enforcement Act of 1989 (FIRREA).
    The agencies are proposing this change to eliminate the uncertainty 
and attendant compliance burden created by the ambiguous term 
``management functions.'' The proposals incorporate specific 
illustrative examples of positions at depository organizations that 
will be treated as senior executive officers. See 12 CFR 5.51(c)(3) 
(OCC); 12 CFR 225.71(a) (Board); 12 CFR 303.14(a)(3) (FDIC); and 12 CFR 
574.9(a)(2) (OTS). The agencies believe that these definitions will 
allow depository organizations to identify impermissible interlocks 
with greater certainty and thus will enhance compliance. The agencies 
request comment on the advisability of defining ``management official'' 
by using ``senior executive officer'' rather than ``employee or officer 
with management functions.''
    The current definition of ``management official'' exempts those 
individuals whose management functions relate to retail merchandising 
or manufacturing. Stated another way, the current exemption applies to 
a category of persons whose responsibilities are unrelated to the 
business of a deposit-taking institution.
    The agencies specifically ask commenters to address whether the 
agencies should exempt a broader category of management officials whose 
duties are unrelated to the provision of financial services by a 
depository institution or depository holding company, and if so, how 
the agencies should define that category of excluded officials.

Relevant Metropolitan Statistical Area (RMSA)

    The current regulations define ``relevant metropolitan statistical 
area'' as an MSA, a primary MSA, or a consolidated MSA that is not 
comprised of designated primary MSAs as defined by the Office of 
Management and Budget (OMB). This definition is derived from section 
203(1) of the Interlocks Act (12 U.S.C. 3202(1)).
    The proposed regulations define ``relevant metropolitan statistical 
area (RMSA)'' as an MSA, a primary MSA, or a consolidated MSA that is 
not comprised of designated primary MSAs, to the extent that the OMB 
defines and applies these terms. This change reflects the fact that the 
OMB defines ``consolidated MSA'' to include two or more primary MSAs. 
Given that consolidated MSAs, by the OMB's definition, are comprised of 
primary MSAs, the reference to consolidated MSAs in the Interlocks Act 
and the agencies' regulations is inappropriate. The proposed change 
enables the agencies to implement the statute in a way that complies 
with both the spirit and the letter of the Interlocks Act.

Representative or Nominee

    The current regulations define ``representative or nominee'' as a 
person who serves as a management official and has an express or 
implied obligation to act on behalf of another person with respect to 
management responsibilities. The current definition goes on to state 
that the determination of whether someone is a representative or 
nominee depends on the facts of a particular case and that certain 
relationships (such as family, employment, and so on) may evidence an 
express or implied obligation to act.
    The proposed regulations also define ``representative or nominee'' 
as someone who serves as a management official and has an obligation to 
act on behalf of someone else. The proposed definition deletes the rest 
of the current definition, however, and inserts in lieu thereof a 
statement that the appropriate agency will find that someone has an 
obligation to act on behalf of someone else only if there is an 
agreement (express or implied) to act on behalf of another. The 
agencies propose this change to clarify that the determination that a 
representative or nominee situation exists will depend on whether there 
is a basis to conclude that an agreement exists to act on someone's 
behalf. The agencies note that the current definition provides specific 
guidance for determining when a representative or nominee relationship 
might be found to exist, and request comment on whether the current 
definition, the proposed definition, or another definition is 
preferable.

Prohibitions

    The current regulations prohibit interlocks in the following three 

[[Page 67427]]
    instances. First, no two unaffiliated depository organizations may have 
an interlock if they (or their depository institution affiliates) have 
depository institution offices in the same community. Second, a 
depository organization may not have an interlock with any unaffiliated 
depository organization if either depository organization has assets 
exceeding $20 million and the depository organizations (or depository 
institution affiliates of either) have depository institution offices 
in the same RMSA.3 Third, if a depository organization has total 
assets exceeding $1 billion, it (and its affiliates) may not have an 
interlock with any depository organization with total assets exceeding 
$500 million (or affiliate thereof), regardless of location.

     3 A community as that term is defined in the proposals is 
smaller than an RMSA. There may be several communities in one RMSA.
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    The proposed regulations amend the rules as they apply to 
institutions with assets of less than $20 million to better conform to 
the purposes of the Interlocks Act. Whereas the current rules prohibit 
interlocks in an RMSA if one of the organizations has total assets of 
$20 million or more, the proposed rules would apply the RMSA-wide 
prohibition only if both organizations have total assets of $20 million 
or more. Interlocks within a community involving unaffiliated 
depository organizations would continue to be prohibited.
    The agencies believe that this proposed change is consistent with 
both the language and the intent of the Interlocks Act. While the 
statute uses the plural ``depository institutions'' in section 203(1) 
of the Interlocks Act (12 U.S.C. 3202(1)), in context, neither the 
statute nor its legislative history compels the conclusion that the 
interlock must involve two institutions with less than $20 million in 
assets before the less restrictive prohibition applies.
    The Interlocks Act seeks to prohibit interlocks that could enable 
two institutions to engage in anticompetitive behavior. However, an 
institution with total assets of less than $20 million is likely to 
derive most of its business from the community in which it is located 
and is unlikely to compete with institutions that do not have offices 
in that community. Therefore, interlocks involving one institution with 
assets under $20 million and another institution with assets of at 
least $20 million not in the same community are not likely to lead to 
the anticompetitive conduct that the Interlocks Act is designed to 
prohibit.
    The agencies believe, moreover, that the proposed change will 
promote rather than inhibit competition. Expanding the pool of 
managerial talent for institutions with assets under $20 million could 
enhance the ability of smaller institutions to compete by improving the 
management of these institutions.
    The proposed regulations reflect the change affecting depository 
organizations with less than $20 million in total assets. They also set 
forth the prohibition against interlocks involving large depository 
organizations but do not change the substance of that prohibition. The 
proposed regulations change the style of all three prohibitions in 
order to make them easier to understand.
    The agencies invite comment on any aspect of this proposed section. 
The agencies specifically seek comment on whether the proposed 
reinterpretation of 12 U.S.C. 3202(1) might result in anticompetitive 
effects and thus run counter to the legislative intent of the 
Interlocks Act. For example, could the proposed change enable a large 
bank to engage in anticompetitive conduct by creating interlocks with 
one or more smaller depository institutions located in the same RMSA 
but not in the same community (a ``hub and spokes'' interlock)? The 
agencies also seek comment on whether the final rule should 
specifically address such situations.

Interlocking Relationships Expressly Permitted by Statute

    The current regulations restate most of the exemptions that are 
expressly permitted by the Interlocks Act and list those exemptions 
that the agencies have permitted by regulation pursuant to the broad 
exemptive authority that applied before the enactment of the CDRI Act. 
The current regulations also address interlocks involving diversified 
savings and loan holding companies.
    The proposed regulations state the exemptions found in 12 U.S.C. 
3204(1)-(8).4 The proposals reorder the exemptions set forth in 
the current regulations in order to conform the list of exemptions to 
the list set forth in the Interlocks Act.

     4 The Interlocks Act contains an additional exemption for 
savings associations and savings and loan holding companies that 
have issued stock in connection with a qualified stock issuance 
pursuant to section 10(q) of the Home Owners' Loan Act (12 U.S.C. 
1467a(q)). See 12 U.S.C. 3204(9). The OTS therefore proposes to 
continue to list an additional exemption in its interlocks 
regulation which the other agencies do not list. Another exemption 
provides for interlocks as a result of an emergency acquisition of a 
savings association authorized in accordance with section 13(k) of 
the Federal Deposit Insurance Act (12 U.S.C. 1823(k)) if the FDIC 
has given its approval to the interlock. The FDIC therefore proposes 
to continue to list an additional exemption in its management 
interlocks regulation which the other agencies do not list.
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Regulatory Standards Exemption

    The current regulations contain no Regulatory Standards exemption.
    The proposed regulations set forth the standards that a depository 
organization must satisfy in order to obtain a Regulatory Standards 
exemption. The proposal implements the requirement regarding 
certification by allowing a depository organization's board of 
directors (or the organizers of a depository organization that is being 
formed) to certify to the appropriate agency that no other qualified 
candidates have been found after undertaking reasonable efforts to 
locate other qualified candidates who are not prohibited from service 
under the Interlocks Act. If read narrowly, the Interlocks Act could 
require a depository organization to evaluate every person in a given 
locale that might be qualified and interested. This would create a 
requirement that, in practice, would be impossible to satisfy. Given 
that Congress would not have included an exemption that would have no 
practical application, the agencies believe that the proposed 
``reasonableness'' standard is consistent with the legislative intent.
    The proposed regulations also set forth presumptions that the 
agencies will apply when reviewing an application for a Regulatory 
Standards exemption. First, each agency will presume that an interlock 
will not have an anticompetitive effect if it involves institutions 
that, if merged, would not trigger a challenge from the agencies on 
competitive grounds. This presumption is unavailable, however, for 
interlocks subject to the Major Assets prohibition.
    Generally, the agencies will not object to a merger on competitive 
grounds if the post-merger Herfindahl-Hirschman Index (HHI) for the 
market is less than 1800 and the merger increases the HHI by 200 points 
or less. This presumption will enable applicants to avoid the 
unnecessary burden of submitting a competitive analysis in several 
instances. The agencies have found this HHI benchmark to be a useful 
guide to evaluating anticompetitive effects of interlocks.5 
However, simply analyzing the HHI for the two organizations in a 
potential interlock does not take into 

[[Page 67428]]
account any anticompetitive effects that might stem from a previously 
existing interlock. Accordingly, the agencies are requesting comments 
as to how other interlocks involving depository organizations should be 
viewed in applying this presumption.

    \5\ See, e.g., the OCC's Bank Merger Competitive Analysis Screen 
(OCC Advisory Letter 95-4, July 18, 1995); Department of Justice 
Merger Guidelines (49 FR 26823, June 29, 1984) (applied by the 
Board); FDIC Statement of Policy: Bank Merger Transactions (54 FR 
39045, Sept. 22, 1989).
---------------------------------------------------------------------------

    The second presumption to be applied by the agencies is that a 
person is critical to an institution's safe and sound operations if the 
agencies also approved that individual under section 914 of FIRREA and 
the institution in question either was a newly chartered institution, 
failed to meet minimum capital requirements, or otherwise was in a 
``troubled condition'' as defined in the reviewing agency's section 914 
regulation at the time the section 914 filing was approved.6

    \6\ This presumption also applies to individuals whose service 
as a senior executive officer is approved by the OCC pursuant to the 
standard conditions imposed on newly chartered national banks and to 
individuals whose service as a management official is approved by 
the FDIC as a condition of a grant of deposit insurance prior to the 
opening of the depository institution.
---------------------------------------------------------------------------

    The agencies invite comment on the utility of the proposed 
presumptions and on whether other presumptions also should apply.
    The proposed regulations also address the duration of an interlock 
permitted under the Regulatory Standards exemption. The statute does 
not require that these interlocks terminate. In light of this open-
ended grant of authority, the agencies are not proposing a specific 
term for a permitted exemption. Instead, the agencies may require an 
institution to terminate the interlock if an agency determines that the 
management official in question either no longer is critical to the 
safe and sound operations of the affected organization or that 
continued service will produce an anticompetitive effect. The agencies 
will provide affected organizations an opportunity to submit 
information before they make a final determination to require 
termination of an interlock.

Grandfathered Interlocking Relationships--Removed

    The current regulations restate the grandfather provisions set 
forth in section 206 of the Interlocks Act (12 U.S.C. 3205). Section 
338(a) of the CDRI Act authorizes the agencies to extend a 
grandfathered interlock for an additional five years if the management 
official in question satisfied the statutory criteria for obtaining an 
extension.
    The proposed regulations remove the sections addressing the 
grandfather exemption because they are unnecessary and redundant in 
light of the statute. Individuals who wished to extend their exemption 
already have applied for and received an exemption if they met the 
statutory criteria. The grandfathered exemptions will expire on 
November 10, 1998, unless Congress amends the Interlocks Act again to 
provide another opportunity for an extension.

Management Consignment Exemption

    The current regulations set forth a number of instances in which 
the agencies may permit an exemption to the Interlocks Act. However, 
the statutory provisions authorizing the agencies to grant exemptions 
have been amended, thereby requiring that the current regulations be 
amended as well. The Management Consignment exemption set forth in 
section 209(c) of the Interlocks Act (12 U.S.C. 3207(c)) is modelled 
after certain exemptions that appear in the agencies' current 
regulations.
    The proposed regulations implement the Management Consignment 
exemption, and restate the statutory criteria, with three 
clarifications. First, the proposed rules state that the agencies 
consider a ``newly chartered institution'' to be an institution that 
has been chartered for less than two years at the time it files an 
application for exemption. This standard is consistent with certain 
other banking agency thresholds for determining when an institution is 
considered newly chartered (see, e.g., 12 CFR 5.51(d), 225.72(a)(1); 
303.14(b)).
    Second, the proposal clarifies that the exemption available for 
``minority- and women-owned institutions'' is available for an 
institution that is owned either by minorities or women. In noting the 
types of exemptions that the Federal banking agencies have approved, 
the House Conference Report to the CDRI Act (H.R. Conf. Rep. No. 652, 
103d Cong., 2d Sess. 181 (1994)) (Conference Report) states that the 
types of institutions that have received exemptions include those that 
are ``owned by women or minorities.'' These exemptions ultimately were 
codified in the Interlocks Act. Accordingly, the agencies have 
concluded that Congress intended the Management Consignment exemption 
to assist institutions owned by women and/or by minorities, but did not 
intend to require the institution to be owned by both.
    Third, the proposal permits an interlock if the interlock would 
strengthen the management of either a newly chartered institution or an 
institution that is in an unsafe or unsound condition. Section 
209(c)(1)(C) of the Interlocks Act (12 U.S.C. 3207(c)(1)(C)) permits an 
exemption if the interlock would ``strengthen the management of newly 
chartered institutions that are in an unsafe or unsound condition.'' 
However, this provision contains what appears on its face to be an 
error, given that an exemption limited to situations involving newly 
chartered institutions that also are in an unsafe and unsound condition 
would have no practical utility. The chartering agencies do not approve 
an application for a bank or thrift charter unless the applicant 
seeking a charter can demonstrate that the proposed new financial 
institution will operate in a safe and sound manner for the foreseeable 
future. While there may be an extraordinary instance where a newly 
chartered institution immediately experiences unforeseen problems so 
severe that they threaten the safety and soundness of that institution, 
there is nothing in the legislative history to suggest that Congress 
intended to limit the Management Consignment exemption to such rare 
instances.
    Moreover, the legislative history of the CDRI Act suggests that the 
agencies are to apply the Management Consignment exemption in cases 
involving either newly chartered institutions or institutions that are 
in an unsafe or unsound condition. The Conference Report notes that the 
agencies have used their exemptive authority to grant exemptions in 
limited cases where institutions ``are particularly in need of 
management guidance and expertise to operate in a safe and sound 
manner.'' Id. The Conference Report goes on to state that ``Examples of 
exceptions permissible under an agency management official consignment 
program include improving the provision of credit to low- and moderate-
income areas, increasing the competitive position of minority- and 
women-owned institutions, and strengthening he [sic] management of 
newly chartered institutions or institutions that are in an unsafe or 
unsound condition.'' Id. at 182 (emphasis added).
    Finally, Congress used the exemptions in the agencies' current 
rules as the model for the Management Consignment exemption. See id. at 
181-182. These exemptions distinguish newly chartered institutions from 
institutions that are in an unsafe or unsound condition. The reference 
in the CDRI Act's legislative history to the current regulatory 
exemptions suggests that Congress intended to codify these exemptions.
    For these reasons, the agencies propose to permit exemptions 
pursuant 

[[Page 67429]]
to the Management Consignment exemption if the management official will 
strengthen either a newly chartered institution or an institution that 
is in an unsafe or unsound condition. Commenters are requested to 
address this approach.
    The proposals set forth two presumptions that the agencies will 
apply in connection with an application for an exemption under the 
Management Consignment exemption. First, the agencies will presume that 
an individual is capable of strengthening the management of an 
institution that has been chartered for less than two years if the 
reviewing agency approved the individual to serve as a management 
official of that institution pursuant to section 914 of FIRREA.7 
Second, the agencies will presume that an individual is capable of 
strengthening the management of an institution that is in an unsafe or 
unsound condition if the reviewing agency approved the individual to 
serve under section 914 as a management official of that institution at 
a time when the institution was not in compliance with minimum capital 
requirements or otherwise was in a ``troubled condition.''

    \7\ This presumption also applies to an individual whose service 
as a senior executive officer of a national bank is approved 
pursuant to the standard conditions imposed by the OCC on newly 
chartered national banks and to individuals whose service as a 
management official is approved by the FDIC as a condition of a 
grant of deposit insurance prior to the opening of the depository 
institution.
---------------------------------------------------------------------------

    The agencies believe that presumptions of suitability are less 
valid when applied to the other Management Consignment exemptions 
because there is no reason to conclude that a management official 
approved under section 914 necessarily will improve the flow of credit 
to low- and moderate-income areas or increase the competitive position 
of minority- or woman-owned institutions. No presumption regarding 
effects on competition is proposed, given that this is not a factor to 
be considered by the agencies when reviewing an application for a 
Management Consignment exemption.
    The agencies seek comment on the utility of the proposed 
presumptions and on whether additional presumptions should apply as 
well.
    The proposed regulations set forth the limits on the duration of a 
Management Consignment exemption. The Interlocks Act limits a 
Management Consignment exemption to two years, with a possible 
extension for up to an additional two years if the applicant satisfies 
at least one of the criteria for obtaining a Management Consignment 
exemption. The proposed regulations implement this limitation by 
requiring interested parties to submit an application for an extension 
at least 30 days before the expiration of the initial term of the 
exemption and by clarifying that the presumptions that apply to initial 
applications also apply to extension applications.

Change in Circumstances

    The current regulations provide a 15-month grace period for 
nongrandfathered interlocks that become impermissible due to a change 
in circumstances. This period may be shortened by the agencies under 
appropriate circumstances.
    The proposed regulations revise the style of this section in the 
current regulations but not its substance.
    The agencies seek comment on the proposed continued availability of 
a grace period.

Enforcement

    The current regulations set forth the jurisdiction of the agencies 
that enforce the Interlocks Act.
    The proposed regulations simplify the style of this section in the 
current regulations but not its substance.

Small Market Share Exemption

    In 1994, the OCC, Board, and FDIC published separate notices of 
proposed rulemaking seeking comment on a proposed exemption for 
interlocks involving institutions that, on a combined basis, would 
control less than 20 percent of the deposits in a community or relevant 
MSA. These agencies published small market share exemption proposals 
pursuant to the broad exemptive authority vested in the agencies prior 
to the enactment of the CDRI Act. However, as previously noted, the 
CDRI Act amended the agencies' broad rulemaking authority by 
authorizing the agencies to grant exemptions only in more narrow 
circumstances. In light of this statutory change, the three agencies 
believe that it would be inappropriate to adopt the proposed small 
market share exemption. The FDIC already has withdrawn its proposal 
regarding the small market share exemption (see 60 FR 7139 (February 7, 
1995)). The OCC and Board hereby withdraw their respective proposals.

Paperwork Reduction Act

    The OCC, FDIC, and OTS invite comment on:
    (1) Whether the proposed collection of information contained in 
this notice of proposed rulemaking is necessary for the proper 
performance of each agency's functions, including whether the 
information has practical utility;
    (2) The accuracy of each agency's estimate of the burden of the 
proposed information collection;
    (3) Ways to enhance the quality, utility, and clarity of the 
information to be collected; and
    (4) Ways to minimize the burden of the information collection on 
respondents, including through the use of automated collection 
techniques or other forms of information technology.
    Respondents are not required to respond to this collection of 
information unless it displays a currently valid OMB control number.
    OCC: The collection of information requirements contained in this 
notice of proposed rulemaking have been submitted to the Office of 
Management and Budget for review in accordance with the Paperwork 
Reduction Act of 1995 (44 U.S.C. 3507(d)). Comments on the collections 
of information should be sent to the Office of Management and Budget, 
Paperwork Reduction Project (1557-0196), Washington, DC 20503, with 
copies to the Legislative and Regulatory Activities Division (1557-
0196), Office of the Comptroller of the Currency, 250 E Street, SW, 
Washington, DC 20219.
    The collection of information requirements in this proposed rule 
are found in 12 CFR 26.4(h)(1)(i), 26.5(a)(1), 26.5(a)(2), 26.6(a), and 
26.6(c). This information is required to evidence compliance with the 
requirements of the Interlocks Act by national banks and District 
banks. The likely respondents are national banks and District banks.
    Estimated average annual burden hours per respondent: 3 hours.
    Estimated number of respondents: 100.
    Start-up costs to respondents: None.
    Board: In accordance with section 3506 of the Paperwork Reduction 
Act of 1995 (44 U.S.C. Ch. 35; 5 CFR 1320 Appendix A.1), the Board 
reviewed the proposed rule under the authority delegated to the Board 
by the Office of Management and Budget. Comments on the collections of 
information should be sent to the Office of Management and Budget, 
Paperwork Reduction Project (7100-0046, 7100-0134, 7100-0171, 7100-
0266), Washington, DC 20503, with copies of such comments to be sent to 
Mary M. McLaughlin, Federal Reserve Board Clearance Officer, Division 
of Research and Statistics, Mail Stop 97, Board of Governors of the 
Federal Reserve System, Washington, DC 20551.
    The collection of information requirements in this proposed 
rulemaking are found in 12 CFR 

[[Page 67430]]
212.4(h)(1)(i), 212.5(a)(1), 212.5(a)(2), 212.6(a), and 212.6(c). This 
information is required to evidence compliance with the requirements of 
the Interlocks Act as amended by section 338 of the CDRI Act. The 
respondents are state member banks and subsidiary depository 
institutions of bank holding companies.
    Currently, information on management official interlocks is 
gathered as a part of the following applications: membership in the 
Federal Reserve System (OMB No. 7100-0046); state member bank mergers 
(OMB No. 7100-0266); changes in bank control (OMB No. 7100-0134); and 
bank holding company acquisitions of depository institutions (OMB No. 
7100-0171). The estimated portion of burden for each application that 
is attributable to management interlocks averages 4 hours, and the 
burden ranges from as much as 6 hours to as little as 0.5 hours. It is 
estimated that 822 applications are filed annually, with an estimate of 
3,288 hours of annual burden. Based on an hourly cost of $20, the 
annual cost to the public is estimated to be $65,760. The Federal 
Reserve believes that the proposed rule will have a minimal effect on 
respondent burden.
    The Federal Reserve may not conduct or sponsor, and an organization 
is not required to respond to, these information collections unless 
they display currently valid OMB control numbers.
    No issues of confidentiality under the provisions of the Freedom of 
Information Act normally arise for the applications.
    Comments are invited on: (1) Whether the proposed revised 
collections of information are necessary for the proper performance of 
the Federal Reserve's functions, including whether the information has 
practical utility; (2) the accuracy of the Federal Reserve's estimate 
of the burden of the proposed information collections, including the 
cost of compliance; (3) ways to enhance the quality, utility, and 
clarity of the information to be collected; and (4) ways to minimize 
the burden of information collection on respondents, including through 
the use of automated collection techniques or other forms of 
information technology.
    FDIC: The collections of information contained in this notice of 
proposed rulemaking have been submitted to the Office of Management and 
Budget for review in accordance with the Paperwork Reduction Act of 
1995 (44 U.S.C. 3507(d)). Comments on the collections of information 
should be sent to the Office of Management and Budget, Paperwork 
Reduction Project (3604-0092), Washington, DC 20503, with copies of 
such comments to be sent to Steven F. Hanft, Office of the Executive 
Secretary, Room F-453, Federal Deposit Insurance Corporation, 550 17th 
Street, NW., Washington, DC 20429.
    The collection of information requirements in this proposed 
regulation are found in 12 CFR 348.4(i)(1)(i), 348.5(a)(1), 
348.5(a)(2), 348.6(a), and 348.6(c). This information is required to 
evidence compliance with the requirements of the Interlocks Act as 
amended by section 338 of the CDRI Act. The likely respondents are 
insured nonmember banks.
    Estimated number of respondents: 6 applicants per year.
    Estimated average annual burden per respondent: 4 hours.
    Estimated annual frequency of recordkeeping: Not applicable (one-
time application).
    Estimated total annual recordkeeping burden: 24 hours.
    OTS: The collection of information requirements contained in this 
notice of proposed rulemaking have been submitted to the Office of 
Management and Budget for review in accordance with the Paperwork 
Reduction Act of 1995 (44 U.S.C. 3507(d)). Comments on the collection 
of information should be sent to the Office of Management and Budget, 
Paperwork Reduction Project (1550), Washington, DC 20503, with copies 
to the Business Transactions Division (1550), Office of Thrift 
Supervision, 1700 G Street, NW, Washington, DC.
    The collection of information requirements in this proposed rule 
are found in 12 CFR 563f.4(h)(1)(i), 563f.5(a)(1), 563f.5(a)(2), 
563f.6(a), and 563f.6(c). This information is required to evidence 
compliance with the requirements of the Interlocks Act by savings 
associations. The likely respondents are national savings associations.
    Estimated average annual burden hours per respondent: 4 hours.
    Estimated number of respondents: 8.
    Start-up costs to respondents: None.

Regulatory Flexibility Act

    Pursuant to section 605(b) of the Regulatory Flexibility Act (RFA) 
(5 U.S.C. 605(b)), the initial regulatory flexibility analysis 
otherwise required under section 603 of the RFA (5 U.S.C. 603) is not 
required if the head of the agency certifies that the rule will not 
have a significant economic impact on a substantial number of small 
entities and the agency publishes such certification and a succinct 
statement explaining the reasons for such certification in the Federal 
Register along with its general notice of proposed rulemaking.
    Pursuant to section 605(b) of the RFA, the agencies hereby certify 
that this proposed rule will not have a significant economic impact on 
a substantial number of small entities. The agencies expect that this 
proposal will not (1) have significant secondary or incidental effects 
on a substantial number of small entities or (2) create any additional 
burden on small entities. Moreover, the changes to the exemptions 
available are required by the Interlocks Act. Accordingly, a regulatory 
flexibility analysis is not required.

Executive Order 12866

    OCC and OTS: The OCC and OTS have determined that this proposal is 
not a significant regulatory action under Executive Order 12866.

Unfunded Mandates Act of 1995

    OCC and OTS: Section 202 of the Unfunded Mandates Act of 1995 
(Unfunded Mandates Act) requires that an agency prepare a budgetary 
impact statement before promulgating a proposed rule likely to result 
in a Federal mandate that may result in the annual expenditure of $100 
million or more in any one year by State, local, and tribal 
governments, in the aggregate, or by the private sector. If a budgetary 
impact statement is required, section 205 of the Unfunded Mandates Act 
requires an agency to identify and consider a reasonable number of 
alternatives before promulgating a proposal.
    The OCC and OTS have determined that the proposed rule will not 
result in expenditures by State, local, and tribal governments, or by 
the private sector, of more than $100 million in any one year. 
Accordingly, neither the OCC nor the OTS has prepared a budgetary 
impact statement or specifically addressed the regulatory alternatives 
considered.

List of Subjects

12 CFR Part 26

    Antitrust, Banks, banking, Holding companies, Management official 
interlocks, National banks.

12 CFR Part 212

    Antitrust, Banks, banking, Holding companies, Management official 
interlocks.

12 CFR Part 348

    Antitrust, Banks, banking, Holding companies. 
    
[[Page 67431]]


12 CFR Part 563f

    Antitrust, Holding companies, Management official interlocks, 
Savings associations.

Office of the Comptroller of the Currency

12 CFR CHAPTER I

Authority and Issuance

    For the reasons set out in the joint preamble, the OCC proposes to 
revise part 26 of chapter I of title 12 of the Code of Federal 
Regulations to read as follows:

PART 26--MANAGEMENT OFFICIAL INTERLOCKS

Sec.
26.1 Authority, purpose, and scope.
26.2 Definitions.
26.3 Prohibitions.
26.4 Interlocking relationships permitted by statute.
26.5 Regulatory Standards exemption.
26.6 Management Consignment exemption.
26.7 Change in circumstances.
26.8 Enforcement.
    Authority: 12 U.S.C. 93a and 3201-3208.


Sec. 26.1  Authority, purpose, and scope.

    (a) Authority. This part is issued under the provisions of the 
Depository Institution Management Interlocks Act (Interlocks Act) (12 
U.S.C. 3201 et seq.), as amended, and the OCC's general rulemaking 
authority in 12 U.S.C. 93a.
    (b) Purpose. The purpose of the Interlocks Act and this part is to 
foster competition by generally prohibiting a management official from 
serving two nonaffiliated depository organizations in situations where 
the management interlock likely would have an anticompetitive effect.
    (c) Scope. This part applies to management officials of national 
banks, District banks, and affiliates of either.


Sec. 26.2  Definitions.

    For purposes of this part, the following definitions apply:
    (a) Affiliate. (1) The term affiliate has the meaning given in 
section 202 of the Interlocks Act (12 U.S.C. 3201). For purposes of 
that section, shares held by an individual include shares held by 
members of his or her immediate family. ``Immediate family'' includes 
spouse, mother, father, child, grandchild, sister, brother, or any of 
their spouses, whether or not any of their shares are held in trust.
    (2) For purposes of section 202(3)(B) of the Interlocks Act (12 
U.S.C. 3201(3)(B)), an affiliate relationship involving a national bank 
based on common ownership does not exist if the OCC determines, after 
giving the affected persons the opportunity to respond, that the 
asserted affiliation was established in order to avoid the prohibitions 
of the Interlocks Act and does not represent a true commonality of 
interest between the depository organizations. In making this 
determination, the OCC considers, among other things, whether a person, 
including members of his or her immediate family, whose shares are 
necessary to constitute the group owns a nominal percentage of the 
shares of one of the organizations and the percentage is substantially 
disproportionate with that person's ownership of shares in the other 
organization.
    (b) Anticompetitive effect means a monopoly or substantial 
lessening of competition.
    (c) Area median income means:
    (1) The median family income for the metropolitan statistical area 
(MSA), if a depository organization is located in an MSA; or
    (2) The statewide nonmetropolitan median family income, if a 
depository organization is located outside an MSA.
    (d) Community means city, town, or village, and contiguous or 
adjacent cities, towns, or villages.
    (e) Contiguous or adjacent cities, towns, or villages means cities, 
towns, or villages whose borders touch each other or whose borders are 
within 10 road miles of each other at their closest points. The 
property line of an office located in an unincorporated city, town, or 
village is the boundary line of that city, town, or village for the 
purpose of this definition.
    (f) Critical means important to restoring or maintaining a 
depository organization's safe and sound operations.
    (g) Depository holding company means a bank holding company or a 
savings and loan holding company (as more fully defined in section 202 
of the Interlocks Act (12 U.S.C. 3201)) having its principal office 
located in the United States.
    (h) Depository institution means a commercial bank (including a 
private bank), a savings bank, a trust company, a savings and loan 
association, a building and loan association, a homestead association, 
a cooperative bank, an industrial bank, or a credit union, chartered 
under the laws of the United States and having a principal office 
located in the United States. Additionally, a United States office, 
including a branch or agency, of a foreign commercial bank is a 
depository institution.
    (i) Depository institution affiliate means a depository institution 
that is an affiliate of a depository organization.
    (j) Depository organization means a depository institution or a 
depository holding company.
    (k) District bank means any State bank operating under the Code of 
Law of the District of Columbia.
    (l) Low- and moderate-income areas means areas where the median 
family income is less than 100 percent of the area median income.
    (m) Management official. (1) The term management official includes:
    (i) A director;
    (ii) An advisory or honorary director of a depository institution 
with total assets of $100 million or more;
    (iii) A senior executive officer as that term is defined in 12 CFR 
5.51(c)(3);
    (iv) A branch manager;
    (v) A trustee of a depository organization under the control of 
trustees; and
    (vi) Any person who has a representative or nominee serving in any 
of the capacities in this paragraph (m)(1).
    (2) The term management official does not include:
    (i) A person whose management functions relate exclusively to the 
business of retail merchandising or manufacturing;
    (ii) A person whose management functions relate principally to the 
business outside the United States of a foreign commercial bank; or
    (iii) A person described in the provisos of section 202(4) of the 
Interlocks Act (12 U.S.C. 3201(4)) (referring to an officer of a State-
chartered savings bank, cooperative bank, or trust company that neither 
makes real estate mortgage loans nor accepts savings).
    (n) Office means a principal or branch office of a depository 
institution located in the United States. Office does not include a 
representative office of a foreign commercial bank, an electronic 
terminal, or a loan production office.
    (o) Person means a natural person, corporation, or other business 
entity.
    (p) Relevant metropolitan statistical area (RMSA) means an MSA, a 
primary MSA, or a consolidated MSA that is not comprised of designated 
primary MSAs to the extent that these terms are defined and applied by 
the Office of Management and Budget.
    (q) Representative or nominee means a natural person who serves as 
a management official and has an obligation to act on behalf of another 
person with respect to management responsibilities. The OCC will find 
that a person has an obligation to act on 

[[Page 67432]]
behalf of another person only if the first person has an agreement, 
express or implied, to act on behalf of the second person with respect 
to management responsibilities. The OCC will determine, after giving 
the affected persons an opportunity to respond, whether a person is a 
representative or nominee.
    (r) Total assets. (1) The term total assets means assets measured 
on a consolidated basis and reported in the most recent fiscal year-end 
Consolidated Report of Condition and Income.
    (2) The term total assets does not include:
    (i) Assets of a diversified savings and loan holding company as 
defined by section 10(a)(1)(F) of the Home Owners' Loan Act (12 U.S.C. 
1467a(a)(1)(F)) other than the assets of its depository institution 
affiliate;
    (ii) Assets of a bank holding company that is exempt from the 
prohibitions of section 4 of the Bank Holding Company Act of 1956 
pursuant to an order issued under section 4(d) of that Act (12 U.S.C. 
1843(d)) other than the assets of its depository institution affiliate; 
or
    (iii) Assets of offices of a foreign commercial bank other than the 
assets of its United States branch or agency.
    (s) United States means the United States of America, any State or 
territory of the United States of America, the District of Columbia, 
Puerto Rico, Guam, American Samoa, and the Virgin Islands.


Sec. 26.3  Prohibitions.

    (a) Community. A management official of a depository organization 
may not serve at the same time as a management official of an 
unaffiliated depository organization if the depository organizations in 
question (or a depository institution affiliate thereof) have offices 
in the same community.
    (b) RMSA. A management official of a depository organization may 
not serve at the same time as a management official of an unaffiliated 
depository organization if the depository organizations in question (or 
a depository institution affiliate thereof) have offices in the same 
RMSA and each depository organization has total assets of $20 million 
or more.
    (c) Major assets. A management official of a depository 
organization with total assets exceeding $1 billion (or any affiliate 
thereof) may not serve at the same time as a management official of an 
unaffiliated depository organization with total assets exceeding $500 
million (or any affiliate thereof), regardless of the location of the 
two depository organizations.


Sec. 26.4  Interlocking relationships permitted by statute.

    The prohibitions of Sec. 26.3 do not apply in the case of any one 
or more of the following organizations or to a subsidiary thereof:
    (a) A depository organization that has been placed formally in 
liquidation, or which is in the hands of a receiver, conservator, or 
other official exercising a similar function;
    (b) A corporation operating under section 25 or section 25A of the 
Federal Reserve Act (12 U.S.C. 601 et seq. and 12 U.S.C. 611 et seq., 
respectively) (Edge Corporations and Agreement Corporations);
    (c) A credit union being served by a management official of another 
credit union;
    (d) A depository organization that does not do business within the 
United States except as an incident to its activities outside the 
United States;
    (e) A State-chartered savings and loan guaranty corporation;
    (f) A Federal Home Loan Bank or any other bank organized solely to 
serve depository institutions (a bankers' bank) or solely for the 
purpose of providing securities clearing services and services related 
thereto for depository institutions and securities companies;
    (g) A depository organization that is closed or is in danger of 
closing as determined by the appropriate Federal depository 
institutions regulatory agency and is acquired by another depository 
organization. This exemption lasts for five years, beginning on the 
date the depository organization is acquired; and
    (h)(1) A diversified savings and loan holding company (as defined 
in section 10(a)(1)(F) of the Home Owners' Loan Act (12 U.S.C. 
1467a(a)(1)(F)) with respect to the service of a director of such 
company who also is a director of an unaffiliated depository 
organization if:
    (i) Both the diversified savings and loan holding company and the 
unaffiliated depository organization notify their appropriate Federal 
depository institutions regulatory agency at least 60 days before the 
dual service is proposed to begin; and
    (ii) The appropriate regulatory agency does not disapprove the dual 
service before the end of the 60-day period.
    (2) The OCC may disapprove a notice of proposed service if it finds 
that:
    (i) The service cannot be structured or limited so as to preclude 
an anticompetitive effect in financial services in any part of the 
United States;
    (ii) The service would lead to substantial conflicts of interest or 
unsafe or unsound practices; or
    (iii) The notificant failed to furnish all the information required 
by the OCC.
    (3) The OCC may require that any interlock permitted under this 
paragraph (h) be terminated if a change in circumstances occurs with 
respect to one of the interlocked depository organizations that would 
have provided a basis for disapproval of the interlock during the 
notice period.


Sec. 26.5   Regulatory Standards exemption.

    (a) Criteria. The OCC may permit an interlock that otherwise would 
be prohibited by the Interlocks Act and Sec. 26.3 if:
    (1) The board of directors of the depository organization (or the 
organizers of a depository organization being formed) that seeks the 
exemption provides a resolution to the OCC certifying that the 
organization, after the exercise of reasonable efforts, is unable to 
locate any other candidate from the community or RMSA, as appropriate, 
who:
    (i) Possesses the level of expertise required by the depository 
organization and who is not prohibited from service by the Interlocks 
Act; and
    (ii) Is willing to serve as a management official; and
    (2) The OCC, after reviewing an application submitted by the 
depository organization seeking the exemption, determines that:
    (i) The management official is critical to the safe and sound 
operations of the affected depository organization; and
    (ii) Service by the management official will not produce an 
anticompetitive effect with respect to the depository organization.
    (b) Presumptions. The OCC applies the following presumptions when 
reviewing any application for a Regulatory Standards exemption:
    (1) An interlock has no anticompetitive effect if it involves 
depository institutions that, if merged, would not cause the post-
merger Herfindahl-Hirschman Index (HHI) to exceed 1800 and would not 
cause the HHI to increase by more than 200 points. This presumption 
does not apply to institutions subject to the major assets prohibition 
of Sec. 26.3(c).
    (2) A proposed management official is critical to the safe and 
sound operations of a depository institution if that official is 
approved by the OCC to serve as a director or senior executive officer 
of that institution pursuant to 12 CFR 5.51 or pursuant to conditions 
imposed on a newly chartered national bank and the institution had 
operated for less than two years, was not in compliance with minimum 
capital requirements, or otherwise was in a ``troubled condition'' 

[[Page 67433]]
as defined in 12 CFR 5.51 at the time the service under that section 
was approved.
    (c) Duration of interlock. An interlock permitted under this 
section may continue until the OCC notifies the affected organizations 
otherwise. The OCC may require a national bank to terminate any 
interlock permitted under this section if the OCC concludes, after 
giving the affected persons the opportunity to respond, that the 
determinations under paragraph (a)(2) of this section no longer may be 
made.


Sec. 26.6   Management Consignment exemption.

    (a) Criteria. The OCC may permit an interlock that otherwise would 
be prohibited by the Interlocks Act and Sec. 26.3 if the OCC, after 
reviewing an application submitted by the depository organization 
seeking an exemption, determines that the interlock would:
    (1) Improve the provision of credit to low- and moderate-income 
areas;
    (2) Increase the competitive position of a minority- or woman-owned 
depository organization;
    (3) Strengthen the management of a depository institution that has 
been chartered for less than two years at the time an application is 
filed under this part; or
    (4) Strengthen the management of a depository institution that is 
in an unsafe or unsound condition as determined by the OCC on a case-
by-case basis.
    (b) Presumptions. The OCC applies the following presumptions when 
reviewing any application for a Management Consignment exemption:
    (1) A proposed management official is capable of strengthening the 
management of a depository institution described in paragraph (a)(3) of 
this section if that official is approved by the OCC to serve as a 
director or senior executive officer of that institution pursuant to 12 
CFR 5.51 or pursuant to conditions imposed on a newly chartered 
national bank and the institution had operated for less than two years 
at the time the service under 12 CFR 5.51 was approved; and
    (2) A proposed management official is capable of strengthening the 
management of a depository institution described in paragraph (a)(4) of 
this section if that official is approved by the OCC to serve as a 
director or senior executive officer of that institution pursuant to 12 
CFR 5.51 and the institution was not in compliance with minimum capital 
requirements or otherwise was in a ``troubled condition'' as defined 
under 12 CFR 5.51 at the time service under that section was approved.
    (c) Duration of interlock. An interlock granted under this section 
may continue for a period of two years from the date of approval. The 
OCC may extend this period for one additional two-year period if the 
depository organization applies for an extension at least 30 days 
before the current exemption expires and satisfies one of the criteria 
specified in paragraph 26.6(a) of this section. The provisions set 
forth in paragraph (b) of this section also apply to applications for 
extensions.


Sec. 26.7   Change in circumstances.

    (a) Termination. A management official shall terminate his or her 
service or apply for an exemption to the Interlocks Act if a change in 
circumstances causes the service to become prohibited under that Act. A 
change in circumstances may include, but is not limited to, an increase 
in asset size of an organization, a change in the delineation of the 
RMSA or community, the establishment of an office, an acquisition, a 
merger, a consolidation, or any reorganization of the ownership 
structure of a depository organization that causes a previously 
permissible interlock to become prohibited.
    (b) Transition period. A management official described in paragraph 
(a) of this section may continue to serve the depository institution 
involved in the interlock for 15 months following the date of the 
change in circumstances. The OCC may shorten this period under 
appropriate circumstances.


Sec. 26.8   Enforcement.

    Except as noted in this section, the OCC administers and enforces 
the Interlocks Act with respect to national banks, District banks, and 
affiliates of either, and may refer any case of a prohibited 
interlocking relationship involving these institutions to the Attorney 
General of the United States to enforce compliance with the Interlocks 
Act and this part. If an affiliate of a national bank or a District 
bank is subject to the primary regulation of another Federal depository 
organization supervisory agency, then the OCC does not administer and 
enforce the Interlocks Act with respect to that affiliate.

    Dated: November 27, 1998.
Eugene A. Ludwig,
Comptroller of the Currency.

Federal Reserve System

12 CFR CHAPTER II

Authority and Issuance

    For the reasons set forth in the joint preamble, the Board proposes 
to revise part 212 of chapter II of title 12 of the Code of Federal 
Regulations to read as follows:

PART 212--MANAGEMENT OFFICIAL INTERLOCKS

Sec.
212.1  Authority, purpose, and scope.
212.2  Definitions.
212.3  Prohibitions.
212.4  Interlocking relationships permitted by statute.
212.5  Regulatory Standards exemption.
212.6  Management Consignment exemption.
212.7  Change in circumstances.
212.8  Enforcement.
212.9  Effect of Interlocks Act on Clayton Act.

    Authority: 12 U.S.C. 3201-3208; 15 U.S.C. 19.


Sec. 212.1   Authority, purpose, and scope.

    (a) Authority. This part is issued under the provisions of the 
Depository Institution Management Interlocks Act (Interlocks Act) (12 
U.S.C. 3201 et seq.), as amended.
    (b) Purpose. The purpose of the Interlocks Act and this part is to 
foster competition by generally prohibiting a management official from 
serving two nonaffiliated depository organizations in situations where 
the management interlock likely would have an anticompetitive effect.
    (c) Scope. This part applies to management officials of state 
member banks, bank holding companies, and their affiliates.


Sec. 212.2   Definitions.

    For purposes of this part, the following definitions apply:
    (a) Affiliate. (1) The term affiliate has the meaning given in 
section 202 of the Interlocks Act (12 U.S.C. 3201). For purposes of 
that section, shares held by an individual include shares held by 
members of his or her immediate family. ``Immediate family'' includes 
spouse, mother, father, child, grandchild, sister, brother, or any of 
their spouses, whether or not any of their shares are held in trust.
    (2) For purposes of section 202(3)(B) of the Interlocks Act (12 
U.S.C. 3201(3)(B)), an affiliate relationship based on common ownership 
does not exist if the Board determines, after 

[[Page 67434]]
giving the affected persons the opportunity to respond, that the 
asserted affiliation was established in order to avoid the prohibitions 
of the Interlocks Act and does not represent a true commonality of 
interest between the depository organizations. In making this 
determination, the Board considers, among other things, whether a 
person, including members of his or her immediate family, whose shares 
are necessary to constitute the group owns a nominal percentage of the 
shares of one of the organizations and the percentage is substantially 
disproportionate with that person's ownership of shares in the other 
organization.
    (b) Anticompetitive effect means a monopoly or substantial 
lessening of competition.
    (c) Area median income means:
    (1) The median family income for the metropolitan statistical area 
(MSA), if a depository organization is located in an MSA; or
    (2) The statewide nonmetropolitan median family income, if a 
depository organization is located outside an MSA.
    (d) Community means city, town, or village, or contiguous and 
adjacent cities, towns, or villages.
    (e) Contiguous or adjacent cities, towns, or villages means cities, 
towns, or villages whose borders touch each other or whose borders are 
within 10 road miles of each other at their closest points. The 
property line of an office located in an unincorporated city, town, or 
village is the boundary line of that city, town, or village for the 
purpose of this definition.
    (f) Critical, as used in Sec. 212.5, means important to restoring 
or maintaining a depository organization's safe and sound operations.
    (g) Depository holding company means a bank holding company or a 
savings and loan holding company (as more fully defined in section 202 
of the Interlocks Act (12 U.S.C. 3201)) having its principal office 
located in the United States.
    (h) Depository institution means a commercial bank (including a 
private bank), a savings bank, a trust company, a savings and loan 
association, a building and loan association, a homestead association, 
a cooperative bank, an industrial bank, or a credit union, chartered 
under the laws of the United States and having a principal office 
located in the United States. Additionally, a United States office, 
including a branch or agency, of a foreign commercial bank is a 
depository institution.
    (i) Depository institution affiliate means a depository institution 
that is an affiliate of a depository organization.
    (j) Depository organization means a depository institution or a 
depository holding company.
    (k) Low- and moderate-income areas means areas where the median 
family income is less than 100 percent of the area median income.
    (l) Management official. (1) The term management official includes:
    (i) A director;
    (ii) An advisory or honorary director of a depository institution 
with total assets of $100 million or more;
    (iii) A senior executive officer as that term is defined in 12 CFR 
225.71(a);
    (iv) A branch manager;
    (v) A trustee of a depository organization under the control of 
trustees; and
    (vi) Any person who has a representative or nominee, as defined in 
paragraph (p) of this section, serving in any of the capacities in this 
paragraph (l) (1).
    (2) The term management official does not include:
    (i) A person whose management functions relate exclusively to the 
business of retail merchandising or manufacturing;
    (ii) A person whose management functions relate principally to a 
foreign commercial bank's business outside the United States; or
    (iii) A person described in the provisos of section 202(4) of the 
Interlocks Act (referring to an officer of a State-chartered savings 
bank, cooperative bank, or trust company that neither makes real estate 
mortgage loans nor accepts savings).
    (m) Office means a principal or branch office of a depository 
institution located in the United States. Office does not include a 
representative office of a foreign commercial bank, an electronic 
terminal, a loan production office.
    (n) Person means a natural person, corporation, or other business 
entity.
    (o) Relevant metropolitan statistical area (RMSA) means an MSA, a 
primary MSA, or a consolidated MSA that is not comprised of designated 
Primary MSAs to the extent that these terms are defined and applied by 
the Office of Management and Budget.
    (p) Representative or nominee means a natural person who serves as 
a management official and has an obligation to act on behalf of another 
person with respect to management responsibilities. The Board will find 
that a person has an obligation to act on behalf of another person only 
if the first person has an agreement, express or implied, to act on 
behalf of the second person with respect to management 
responsibilities. The Board will determine, after giving the affected 
persons an opportunity to respond, whether a person is a representative 
or nominee.
    (q) Total assets. (1) The term total assets means assets measured 
on a consolidated basis and reported in the most recent fiscal year-end 
Consolidated Report of Condition and Income.
    (2) The term total assets does not include:
    (i) Assets of a diversified savings and loan holding company as 
defined by section 10(a)(1)(F) of the Home Owners' Loan Act (12 U.S.C. 
1467a(a)(1)(F)) other than the assets of its depository institution 
affiliate;
    (ii) Assets of a bank holding company that is exempt from the 
prohibitions of section 4 of the Bank Holding Company Act of 1956 
pursuant to an order issued under section 4(d) of that Act (12 U.S.C. 
1843(d)) other than the assets of its depository institution affiliate; 
or
    (iii) Assets of offices of a foreign commercial bank other than the 
assets of its United States branch or agency.
    (r) United States means the United States of America, any State or 
territory of the United States of America, the District of Columbia, 
Puerto Rico, Guam, American Samoa, and the Virgin Islands.


Sec. 212.3  Prohibitions.

    (a) Community. A management official of a depository organization 
may not serve at the same time as a management official of an 
unaffiliated depository organization if the depository organizations in 
question (or a depository institution affiliate thereof) have offices 
in the same community.
    (b) RMSA. A management official of a depository organization may 
not serve at the same time as a management official of an unaffiliated 
depository organization if the depository organizations in question (or 
a depository institution affiliate thereof) have offices in the same 
RMSA and each depository organization has total assets of $20 million 
or more.
    (c) Major assets. A management official of a depository 
organization with total assets exceeding $1 billion (or any affiliate 
thereof) may not serve at the same time as a management official of an 
unaffiliated depository organization with total assets exceeding $500 
million (or any affiliate thereof), regardless of the location of the 
two depository organizations.


Sec. 212.4  Interlocking relationships permitted by statute.

    The prohibitions of Sec. 212.3 do not apply in the case of any one 
or more of 

[[Page 67435]]
the following organizations or to a subsidiary thereof:
    (a) A depository organization that has been placed formally in 
liquidation, or which is in the hands of a receiver, conservator, or 
other official exercising a similar function;
    (b) A corporation operating under section 25 or section 25A of the 
Federal Reserve Act (12 U.S.C. 601 et seq. and 12 U.S.C. 611 et seq., 
respectively) (Edge Corporations and Agreement Corporations);
    (c) A credit union being served by a management official of another 
credit union;
    (d) A depository organization that does not do business within the 
United States except as an incident to its activities outside the 
United States;
    (e) A State-chartered savings and loan guaranty corporation;
    (f) A Federal Home Loan Bank or any other bank organized solely to 
serve depository institutions (a bankers' bank) or solely for the 
purpose of providing securities clearing services and services related 
thereto for depository institutions and securities companies;
    (g) A depository organization that is closed or is in danger of 
closing as determined by the appropriate Federal depository 
institutions regulatory agency and is acquired by another depository 
organization. This exemption lasts for five years, beginning on the 
date the depository organization is acquired; and
    (h)(1) A diversified savings and loan holding company (as defined 
in section 10(a)(1)(F) of the Home Owners' Loan Act (12 U.S.C. 
1467a(a)(1)(F)) with respect to the service of a director of such 
company who also is a director of an unaffiliated depository 
organization if:
    (i) Both the diversified savings and loan holding company and the 
unaffiliated depository organization notify their appropriate Federal 
depository institutions regulatory agency at least 60 days before the 
dual service is proposed to begin; and
    (ii) The appropriate regulatory agency does not disapprove the dual 
service before the end of the 60-day period.
    (2) The Board may disapprove a notice of proposed service if it 
finds that:
    (i) The service cannot be structured or limited so as to preclude 
an anticompetitive effect in financial services in any part of the 
United States;
    (ii) The service would lead to substantial conflicts of interest or 
unsafe or unsound practices; or
    (iii) The notificant failed to furnish all the information required 
by the Board.
    (3) The Board may require that any interlock permitted under this 
paragraph (h) be terminated if a change in circumstances occurs with 
respect to one of the interlocked depository organizations that would 
have provided a basis for disapproval of the interlock during the 
notice period.


Sec. 212.5  Regulatory Standards exemption.

    (a) Criteria. The Board may permit an interlock that otherwise 
would be prohibited by the Interlocks Act and Sec. 212.3 if:
    (1) The board of directors of the depository organization (or the 
organizers of a depository organization being formed) that seeks the 
exemption provides a resolution to the Board certifying that the 
organization, after the exercise of reasonable efforts, is unable to 
locate any other candidate from the community or RMSA, as appropriate, 
who:
    (i) Possesses the level of expertise required by the depository 
organization and who is not prohibited from service by the Interlocks 
Act; and
    (ii) Is willing to serve as a management official; and
    (2) The Board, after reviewing an application submitted by the 
depository organization seeking the exemption, determines that:
    (i) The management official is critical to the safe and sound 
operations of the affected depository organization; and
    (ii) Service by the management official will not produce an 
anticompetitive effect with respect to the depository organization.
    (b) Presumptions. The Board applies the following presumptions when 
reviewing any application for a Regulatory Standards exemption:
    (1) An interlock has no anticompetitive effect if it involves 
depository institutions that, if merged, would not cause the post-
merger Herfindahl-Hirschman Index (HHI) to exceed 1800 and would not 
cause the HHI to increase by more than 200 points. This presumption 
does not apply to institutions subject to the major assets prohibition 
of Sec. 212.3(c).
    (2) A proposed management official is critical to the safe and 
sound operations of a depository institution if the official is 
approved by the Board to serve as a director or senior executive 
officer of the institution pursuant to 12 CFR 225.71 and the 
institution had operated for less than two years, was not in compliance 
with minimum capital requirements, or otherwise was in a ``troubled 
condition'' as defined in 12 CFR 225.71 at the time the service under 
that section was approved.
    (c) Duration of interlock. An interlock permitted under this 
section may continue until the Board notifies the affected 
organizations otherwise. The Board may require termination of any 
interlock permitted under this section if the Board concludes, after 
giving the affected persons the opportunity to respond, that the 
determinations under paragraph (a)(2) of this section no longer may be 
made.


Sec. 212.6  Management Consignment exemption.

    (a) Criteria. The Board may permit an interlock that otherwise 
would be prohibited by the Interlocks Act and Sec. 212.3 if the Board, 
after reviewing an application submitted by the depository organization 
seeking an exemption, determines that the interlock would:
    (1) Improve the provision of credit to low- and moderate-income 
areas;
    (2) Increase the competitive position of a minority- or woman-owned 
depository organization;
    (3) Strengthen the management of a depository institution that has 
been chartered for less than two years at the time an application is 
filed under this part; or
    (4) Strengthen the management of a depository institution that is 
in an unsafe or unsound condition as determined by the Board on a case-
by-case basis.
    (b) Presumptions. The Board applies the following presumptions in 
reviewing any application for a Management Consignment exemption:
    (1) A proposed management official is capable of strengthening the 
management of a depository institution described in paragraph (a)(3) of 
this section if that official is approved by the Board to serve as a 
director or senior executive officer of that institution pursuant to 12 
CFR 225.71 and the institution had operated for less than two years at 
the time the service was approved; and
    (2) A proposed management official is capable of strengthening the 
management of a depository institution described in paragraph (a)(4) of 
this section if the official is approved by the Board to serve as a 
director or senior executive officer of the institution pursuant to 12 
CFR 225.71 and the institution was not in compliance with minimum 
capital requirements or otherwise was in a ``troubled condition'' as 
defined under 12 CFR 225.71 at the time service was approved.
    (c) Duration of interlock. An interlock granted under this section 
may continue for a period of two years from the date of approval. The 
Board may extend this period for one additional two-year 

[[Page 67436]]
period if the depository organization applies for an extension at least 
30 days before the current exemption expires and satisfies one of the 
criteria specified in paragraph (a) of this section. The provisions set 
forth in paragraph (b) of this section also apply to applications for 
extensions.


Sec. 212.7  Change in circumstances.

    (a) Termination. A management official shall terminate his or her 
service or apply for an exemption to the Interlocks Act if a change in 
circumstances causes the service to become prohibited under that Act. A 
change in circumstances may include, but is not limited to, an increase 
in asset size of an organization, a change in the delineation of the 
RMSA or community, the establishment of an office, an acquisition, a 
merger, a consolidation, or any reorganization of the ownership 
structure of a depository organization that causes a previously 
permissible interlock to become prohibited.
    (b) Transition period. A management official described in paragraph 
(a) of this section may continue to serve the state member bank or bank 
holding company involved in the interlock for 15 months following the 
date of the change in circumstances. The Board may shorten this period 
under appropriate circumstances.


Sec. 212.8  Enforcement.

    Except as noted in this section, the Board administers and enforces 
the Interlocks Act with respect to state member banks, bank holding 
companies, and affiliates of either, and may refer any case of a 
prohibited interlocking relationship involving these institutions to 
the Attorney General of the United States to enforce compliance with 
the Interlocks Act and this part. If an affiliate of a state member 
bank or a bank holding company is subject to the primary regulation of 
another Federal depository organization supervisory agency, then the 
Board does not administer and enforce the Interlocks Act with respect 
to that affiliate.


Sec. 212.9  Effect of Interlocks Act on Clayton Act.

    The Board regards the provisions of the first three paragraphs of 
section 8 of the Clayton Act (15 U.S.C. 19) to have been supplanted by 
the revised and more comprehensive prohibitions on management official 
interlocks between depository organizations in the Interlocks Act.

    Dated: December 14, 1995.
William W. Wiles,
Secretary of the Board.

Federal Deposit Insurance Corporation

12 CFR CHAPTER III

Authority and Issuance

    For the reasons set forth in the joint preamble, pursuant to its 
authority under section 209 of the Depository Institution Management 
Interlocks Act (12 U.S.C. 3207), the Board of Directors of the FDIC 
proposes to revise part 348 of chapter III of title 12 of the Code of 
Federal Regulations to read as follows:

PART 348--MANAGEMENT OFFICIAL INTERLOCKS

Sec.
348.1  Authority, purpose, and scope.
348.2  Definitions.
348.3  Prohibitions.
348.4  Interlocking relationships permitted by statute.
348.5  Regulatory Standards exemption.
348.6  Management Consignment exemption.
348.7  Change in circumstances.
348.8  Enforcement.

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


Sec. 348.1  Authority, purpose, and scope.

    (a) Authority. This part is issued under the provisions of the 
Depository Institution Management Interlocks Act (Interlocks Act) (12 
U.S.C. 3201 et seq.), as amended.
    (b) Purpose. The purpose of the Interlocks Act and this part is to 
foster competition by generally prohibiting a management official from 
serving two nonaffiliated depository organizations in situations where 
the management interlock likely would have an anticompetitive effect.
    (c) Scope. This part applies to management officials of insured 
nonmember banks and their affiliates.


Sec. 348.2  Definitions.

    For purposes of this part, the following definitions apply:
    (a) Affiliate. (1) The term affiliate has the meaning given in 
section 202 of the Interlocks Act (12 U.S.C. 3201). For purposes of 
that section, shares held by an individual include shares held by 
members of his or her immediate family. ``Immediate family'' includes 
spouse, mother, father, child, grandchild, sister, brother or any of 
their spouses, whether or not any of their shares are held in trust.
    (2) For purposes of section 202(3)(B) of the Interlocks Act (12 
U.S.C. 3201(3)(B)), an affiliate relationship involving an insured 
nonmember bank based on common ownership does not exist if the FDIC 
determines, after giving the affected persons the opportunity to 
respond, that the asserted affiliation was established in order to 
avoid the prohibitions of the Interlocks Act and does not represent a 
true commonality of interest between the depository organizations. In 
making this determination, the FDIC considers, among other things, 
whether a person, including members of his or her immediate family 
whose shares are necessary to constitute the group, owns a nominal 
percentage of the shares of one of the organizations and the percentage 
is substantially disproportionate with that person's ownership of 
shares in the other organization.
    (b) Anticompetitive effect means a monopoly or substantial 
lessening of competition.
    (c) Area median income means:
    (1) The median family income for the metropolitan statistical area 
(MSA), if a depository organization is located in an MSA; or
    (2) The statewide nonmetropolitan median family income, if a 
depository organization is located outside an MSA.
    (d) Community means city, town, or village, and contiguous or 
adjacent cities, towns, or villages.
    (e) Contiguous or adjacent cities, towns, or villages means cities, 
towns, or villages whose borders touch each other or whose borders are 
within 10 road miles of each other at their closest points. The 
property line of an office located in an unincorporated city, town, or 
village is the boundary line of that city, town, or village for the 
purpose of this definition.
    (f) Critical means important to restoring or maintaining a 
depository organization's safe and sound operations.
    (g) Depository holding company means a bank holding company or a 
savings and loan holding company (as more fully defined in section 202 
of the Interlocks Act (12 U.S.C. 3201)) having its principal office 
located in the United States.
    (h) Depository institution means a commercial bank (including a 
private bank), a savings bank, a trust company, a savings and loan 
association, a building and loan association, a homestead association, 
a cooperative bank, an industrial bank, or a credit union, chartered 
under the laws of the United States and having a principal office 
located in the United States. Additionally, a United States office, 
including a branch or agency, of a foreign commercial bank is a 
depository institution. 

[[Page 67437]]

    (i) Depository institution affiliate means a depository institution 
that is an affiliate of a depository organization.
    (j) Depository organization means a depository institution or a 
depository holding company.
    (k) Low- and moderate-income areas means areas where the median 
family income is less than 100 percent of the area median income.
    (l) Management official. (1) The term management official includes:
    (i) A director;
    (ii) An advisory or honorary director of a depository institution 
with total assets of $100 million or more;
    (iii) A senior executive officer as that term is defined in 12 CFR 
303.14(a)(3);
    (iv) A branch manager;
    (v) A trustee of a depository organization under the control of 
trustees; and
    (vi) Any person who has a representative or nominee serving in any 
of the capacities in this paragraph (l)(1).
    (2) The term management official does not include:
    (i) A person whose management functions relate exclusively to the 
business of retail merchandising or manufacturing;
    (ii) A person whose management functions relate principally to the 
business outside the United States of a foreign commercial bank; or
    (iii) A person described in the provisos of section 202(4) of the 
Interlocks Act (12 U.S.C. 3201(4)) (referring to an officer of a State-
chartered savings bank, cooperative bank, or trust company that neither 
makes real estate mortgage loans nor accepts savings).
    (m) Office means a principal or branch office of a depository 
institution located in the United States. Office does not include a 
representative office of a foreign commercial bank, an electronic 
terminal, or a loan production office.
    (n) Person means a natural person, corporation, or other business 
entity.
    (o) Relevant metropolitan statistical area (RMSA) means an MSA, a 
primary MSA, or a consolidated MSA that is not comprised of designated 
Primary MSAs to the extent that these terms are defined and applied by 
the Office of Management and Budget.
    (p) Representative or nominee means a natural person who serves as 
a management official and has an obligation to act on behalf of another 
person with respect to management responsibilities. The FDIC will find 
that a person has an obligation to act on behalf of another person only 
if the first person has an agreement, express or implied, to act on 
behalf of the second person with respect to management 
responsibilities. The FDIC will determine, after giving the affected 
persons an opportunity to respond, whether a person is a representative 
or nominee.
    (q) Total assets. (1) The term total assets includes assets 
measured on a consolidated basis and reported in the most recent fiscal 
year-end Consolidated Report of Condition and Income.
    (2) The term total assets does not include:
    (i) Assets of a diversified savings and loan holding company as 
defined by section 10(a)(1)(F) of the Home Owners' Loan Act (12 U.S.C. 
1467a(a)(1)(F)) other than the assets of its depository institution 
affiliate;
    (ii) Assets of a bank holding company that is exempt from the 
prohibitions of section 4 of the Bank Holding Company Act of 1956 
pursuant to an order issued under section 4(d) of that Act (12 U.S.C. 
1843(d)) other than the assets of its depository institution affiliate; 
or
    (iii) Assets of offices of a foreign commercial bank other than the 
assets of its United States branch or agency.
    (r) United States means the United States of America, any State or 
territory of the United States of America, the District of Columbia, 
Puerto Rico, Guam, American Samoa, and the Virgin Islands.


Sec. 348.3  Prohibitions.

    (a) Community. A management official of a depository organization 
may not serve at the same time as a management official of an 
unaffiliated depository organization if the depository organizations in 
question (or a depository institution affiliate thereof) have offices 
in the same community.
    (b) RMSA. A management official of a depository organization may 
not serve at the same time as a management official of an unaffiliated 
depository organization if the depository organizations in question (or 
a depository institution affiliate thereof) have offices in the same 
RMSA and each depository organization has total assets of $20 million 
or more.
    (c) Major assets. A management official of a depository 
organization with total assets exceeding $1 billion (or any affiliate 
thereof) may not serve at the same time as a management official of an 
unaffiliated depository organization with total assets exceeding $500 
million (or any affiliate thereof), regardless of the location of the 
two depository organizations.


Sec. 348.4  Interlocking relationships permitted by statute.

    The prohibitions of Sec. 348.3 do not apply in the case of any one 
or more of the following organizations or to a subsidiary thereof:
    (a) A depository organization that has been placed formally in 
liquidation, or which is in the hands of a receiver, conservator, or 
other official exercising a similar function;
    (b) A corporation operating under section 25 or section 25A of the 
Federal Reserve Act (12 U.S.C. 601 et seq. and 12 U.S.C. 611 et seq., 
respectively) (Edge Corporations and Agreement Corporations);
    (c) A credit union being served by a management official of another 
credit union;
    (d) A depository organization that does not do business within the 
United States except as an incident to its activities outside the 
United States;
    (e) A State-chartered savings and loan guaranty corporation;
    (f) A Federal Home Loan bank or any other bank organized solely to 
serve depository institutions (a bankers' bank) or solely for the 
purpose of providing securities clearing services and services related 
thereto for depository institutions and securities companies;
    (g) A depository organization that is closed or is in danger of 
closing as determined by the appropriate Federal depository 
institutions regulatory agency and is acquired by another depository 
organization. This exemption lasts for five years, beginning on the 
date the depository organization is acquired;
    (h) A savings association whose acquisition has been authorized on 
an emergency basis in accordance with section 13(k) of the Federal 
Deposit Insurance Act (12 U.S.C. 1823(k)) with resulting dual service 
by a management official that would otherwise be prohibited under the 
Interlocks Act which may continue for up to 10 years from the date of 
the acquisition provided that the FDIC has given its approval for the 
continuation of such service; and
    (i)(1) A diversified savings and loan holding company (as defined 
in section 10(a)(1)(F) of the Home Owners' Loan Act (12 U.S.C. 
1467a(a)(1)(F)) with respect to the service of a director of such 
company who is also a director of an unaffiliated depository 
organization if:
    (i) Both the diversified savings and loan holding company and the 
unaffiliated depository organization notify their appropriate Federal 
depository institutions regulatory agency at least 60 days before the 
dual service is proposed to begin; and
    (ii) The appropriate regulatory agency does not disapprove the dual 
service before the end of the 60-day period. 

[[Page 67438]]

    (2) The FDIC may disapprove a notice of proposed service if it 
finds that:
    (i) The service cannot be structured or limited so as to preclude 
an anticompetitive effect in financial services in any part of the 
United States;
    (ii) The service would lead to substantial conflicts of interest or 
unsafe or unsound practices; or
    (iii) The notificant failed to furnish all the information required 
by the FDIC.
    (3) The FDIC may require that any interlock permitted under this 
paragraph (h) be terminated if a change in circumstances occurs with 
respect to one of the interlocked depository organizations that would 
have provided a basis for disapproval of the interlock during the 
notice period.


Sec. 348.5  Regulatory Standards exemption.

    (a) Criteria. The FDIC may permit an interlock that otherwise would 
be prohibited by the Interlocks Act and Sec. 348.3 if:
    (1) The board of directors of the depository organization (or the 
organizers of a depository organization being formed) that seeks the 
exemption provides a resolution to the FDIC certifying that the 
organization, after the exercise of reasonable efforts, is unable to 
locate any other candidate from the community or RMSA, as appropriate, 
who:
    (i) Possesses the level of expertise required by the depository 
organization and who is not prohibited from service by the Interlocks 
Act; and
    (ii) Is willing to serve as a management official; and
    (2) The FDIC, after reviewing an application submitted by the 
depository organization seeking the exemption, determines that:
    (i) The management official is critical to the safe and sound 
operations of the affected depository organization; and
    (ii) Service by the management official will not produce an 
anticompetitive effect with respect to the depository organization.
    (b) Presumptions. The FDIC applies the following presumptions when 
reviewing any application for a Regulatory Standards exemption:
    (1) An interlock has no anticompetitive effect if it involves 
depository institutions that, if merged, would not cause the post-
merger Herfindahl-Hirschman Index (HHI) to exceed 1800 and would not 
cause the HHI to increase by more than 200 points. This presumption 
shall not apply to institutions subject to the major assets prohibition 
of Sec. 348.3(c).
    (2) A proposed management official is critical to the safe and 
sound operations of a depository institution if that official is 
approved by the FDIC to serve as a director or a senior executive 
officer of that institution pursuant to 12 CFR 303.14 and the 
institution had operated for less than two years, was not in compliance 
with minimum capital requirements, or otherwise was in a ``troubled 
condition'' as defined by 12 CFR 303.14(a)(4) at the time the service 
under that section was approved.
    (c) Duration of interlock. An interlock permitted under this 
section may continue until the FDIC notifies the affected organizations 
otherwise. The FDIC may require termination of any interlock permitted 
under this section if the FDIC concludes, after giving the affected 
persons the opportunity to respond, that the determinations under 
paragraph (a)(2) of this section no longer may be made.


Sec. 348.6  Management Consignment exemption.

    (a) Criteria. The FDIC may permit an interlock that otherwise would 
be prohibited by the Interlocks Act and Sec. 348.3 if the FDIC, after 
reviewing an application submitted by the depository organization 
seeking an exemption, determines that the interlock would:
    (1) Improve the provision of credit to low- and moderate-income 
areas;
    (2) Increase the competitive position of a minority- or woman-owned 
depository organization;
    (3) Strengthen the management of a depository institution that has 
been chartered for less than two years at the time an application is 
filed under this part; or
    (4) Strengthen the management of a depository institution that is 
in an unsafe or unsound condition as determined by the FDIC on a case-
by-case basis.
    (b) Presumptions. The FDIC applies the following presumptions when 
reviewing any application for a Management Consignment exemption:
    (1) A proposed management official is capable of strengthening the 
management of a depository institution described in paragraph (a)(3) of 
this section if that official is approved by the FDIC to serve as a 
director or a senior executive officer of that institution pursuant to 
12 CFR 303.14 and the institution had operated for less than two years 
at the time the service under 12 CFR 303.14 was approved; and
    (2) A proposed management official is capable of strengthening the 
management of a depository institution described in paragraph (a)(4) of 
this section if that official is approved by the FDIC to serve as a 
director or a senior executive officer of that institution pursuant to 
12 CFR 303.14 and the institution was not in compliance with minimum 
capital requirements or otherwise was in a ``troubled condition'' as 
defined under 12 CFR 303.14 at the time service under that section was 
approved.
    (c) Duration of interlock. An interlock granted under this section 
may continue for a period of two years from the date of approval. The 
FDIC may extend this period for one additional two-year period if the 
depository organization applies for an extension at least 30 days 
before the current exemption expires and satisfies one of the criteria 
specified in paragraph (a) of this section. The provisions set forth in 
paragraph (b) of this section also apply to applications for 
extensions.


Sec. 348.7  Change in circumstances.

    (a) Termination. A management official shall terminate his or her 
service or apply for an exemption to the Interlocks Act if a change in 
circumstances causes the service to become prohibited under that Act. A 
change in circumstances may include, but is not limited to, an increase 
in asset size of an organization, a change in the delineation of the 
RMSA or community, the establishment of an office, an acquisition, a 
merger, a consolidation, or any reorganization of the ownership 
structure of a depository organization that causes a previously 
permissible interlock to become prohibited.
    (b) Transition period. A management official described in paragraph 
(a) of this section may continue to serve the insured nonmember bank 
involved in the interlock for 15 months following the date of the 
change in circumstances. The FDIC may shorten this period under 
appropriate circumstances.


Sec. 348.8  Enforcement.

    Except as noted in this section, the FDIC administers and enforces 
the Interlocks Act with respect to insured nonmember banks and their 
affiliates and may refer any case of a prohibited interlocking 
relationship involving these institutions to the Attorney General of 
the United States to enforce compliance with the Interlocks Act and 
this part. If an affiliate of an insured nonmember bank is subject to 
the primary regulation of another federal depository organization 
supervisory agency, then the FDIC does not administer and enforce the 
Interlocks Act with respect to that affiliate.

    By order of the Board of Directors.

    Dated at Washington, DC, this 12th day of December, 1995.


[[Page 67439]]

Federal Deposit Insurance Corporation.
Jerry L. Langley,
Executive Secretary.

Office of Thrift Supervision

12 CFR CHAPTER V

Authority and Issuance

    For the reasons set out in the joint preamble, the OTS proposes to 
revise part 563f of chapter V of title 12 of the Code of Federal 
Regulations to read as follows:

PART 563f--MANAGEMENT OFFICIAL INTERLOCKS

Sec.
563f.1  Authority, purpose, and scope.
563f.2  Definitions.
563f.3  Prohibitions.
563f.4  Interlocking relationships permitted by statute.
563f.5  Regulatory Standards exemption.
563f.6  Management Consignment exemption.
563f.7  Change in circumstances.
563f.8  Enforcement.
563f.9  Interlocking relationships permitted pursuant to Federal 
Deposit Insurance Act.

Authority: 12 U.S.C. 3201-3208.


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

    (a) Authority. This part is issued under the provisions of the 
Depository Institution Management Interlocks Act (Interlocks Act) (12 
U.S.C. 3201 et seq.), as amended.
    (b) Purpose. The purpose of the Interlocks Act and this part is to 
foster competition by generally prohibiting a management official from 
serving two nonaffiliated depository organizations in situations where 
the management interlock likely would have an anticompetitive effect.
    (c) Scope. This part applies to management officials of savings 
associations, savings and loan holding companies, and affiliates of 
either.


Sec. 563f.2  Definitions.

    For purposes of this part, the following definitions apply:
    (a) Affiliate. (1) The term affiliate has the meaning given in 
section 202 of the Interlocks Act (12 U.S.C. 3201). For purposes of 
that section, shares held by an individual include shares held by 
members of his or her immediate family. ``Immediate family'' includes 
spouse, mother, father, child, grandchild, sister, brother, or any of 
their spouses, whether or not any of their shares are held in trust.
    (2) For purposes of section 202(3)(B) of the Interlocks Act (12 
U.S.C. 3201(3)(B)), an affiliate relationship involving a savings 
association or savings and loan holding company based on common 
ownership does not exist if the OTS determines, after giving the 
affected persons the opportunity to respond, that the asserted 
affiliation was established in order to avoid the prohibitions of the 
Interlocks Act and does not represent a true commonality of interest 
between the depository organizations. In making this determination, the 
OTS considers, among other things, whether a person, including members 
of his or her immediate family, whose shares are necessary to 
constitute the group owns a nominal percentage of the shares of one of 
the organizations and the percentage is substantially disproportionate 
with that person's ownership of shares in the other organization.
    (b) Anticompetitive effect means a monopoly or substantial 
lessening of competition.
    (c) Area median income means:
    (1) The median family income for the metropolitan statistical area 
(MSA), if a depository organization is located in an MSA; or
    (2) The statewide nonmetropolitan median family income, if a 
depository organization is located outside an MSA.
    (d) Community means city, town, or village, and contiguous or 
adjacent cities, towns, or villages.
    (e) Contiguous or adjacent cities, towns, or villages means cities, 
towns, or villages whose borders touch each other or whose borders are 
within 10 road miles of each other at their closest points. The 
property line of an office located in an unincorporated city, town, or 
village is the boundary line of that city, town, or village for the 
purpose of this definition.
    (f) Critical means important to restoring or maintaining a 
depository organization's safe and sound operations.
    (g) Depository holding company means a bank holding company or a 
savings and loan holding company (as more fully defined in section 202 
of the Interlocks Act (12 U.S.C. 3201)) having its principal office 
located in the United States.
    (h) Depository institution means a commercial bank (including a 
private bank), a savings bank, a trust company, a savings and loan 
association, a building and loan association, a homestead association, 
a cooperative bank, an industrial bank, or a credit union, chartered 
under the laws of the United States and having a principal office 
located in the United States. Additionally, a United States office, 
including a branch or agency, of a foreign commercial bank is a 
depository institution.
    (i) Depository institution affiliate means a depository institution 
that is an affiliate of a depository organization.
    (j) Depository organization means a depository institution or a 
depository holding company.
    (k) Low- and moderate-income areas means areas where the median 
family income is less than 100 percent of the area median income.
    (l) Management official. (1) The term management official includes:
    (i) A director;
    (ii) An advisory or honorary director of a depository institution 
with total assets of $100 million or more;
    (iii) A senior executive officer as that term is defined in 12 CFR 
574.9(a)(2);
    (iv) A branch manager;
    (v) A trustee of a depository organization under the control of 
trustees; and
    (vi) Any person who has a representative or nominee serving in any 
of the capacities in this paragraph (l)(1).
    (2) The term management official does not include:
    (i) A person whose management functions relate exclusively to the 
business of retail merchandising or manufacturing;
    (ii) A person whose management functions relate principally to the 
business outside the United States of a foreign commercial bank; or
    (iii) A person described in the provisos of section 202(4) of the 
Interlocks Act (12 U.S.C. 3201(4)) (referring to an officer of a State-
chartered savings bank, cooperative bank, or trust company that neither 
makes real estate mortgage loans nor accepts savings).
    (m) Office means a principal or branch office of a depository 
institution located in the United States. Office does not include a 
representative office of a foreign commercial bank, an electronic 
terminal, or a loan production office.
    (n) Person means a natural person, corporation, or other business 
entity.
    (o) Relevant metropolitan statistical area (RMSA) means an MSA, a 
primary MSA, or a consolidated MSA that is not comprised of designated 
Primary MSAs to the extent that these terms are defined and applied by 
the Office of Management and Budget.
    (p) Representative or nominee means a natural person who serves as 
a management official and has an obligation to act on behalf of another 
person with respect to management responsibilities. The OTS will find 
that a person has an obligation to act on behalf of another person only 
if the first person has an agreement, express or implied, to act on 
behalf of the second 

[[Page 67440]]
person with respect to management responsibilities. The OTS will 
determine, after giving the affected persons an opportunity to respond, 
whether a person is a representative or nominee.
    (q) Savings association means:
    (i) Any Federal savings association (as defined in section 3(b)(2) 
of the Federal Deposit Insurance Act (12 U.S.C. 1813(b)(2));
    (ii) Any state savings association (as defined in section 3(b)(3) 
of the Federal Deposit Insurance Act (12 U.S.C. 1813(b)(3)) the 
deposits of which are insured by the Federal Deposit Insurance 
Corporation; and
    (iii) Any corporation (other than a bank as defined in section 
3(a)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1813(a)(1)) the 
deposits of which are insured by the Federal Deposit Insurance 
Corporation, that the Board of Directors of the Federal Deposit 
Insurance Corporation and the Director of the Office of Thrift 
Supervision jointly determine to be operating in substantially the same 
manner as a savings association.
    (r) Total assets. (1) The term total assets means assets measured 
on a consolidated basis and reported in the most recent fiscal year-end 
Consolidated Report of Condition and Income.
    (2) The term total assets does not include:
    (i) Assets of a diversified savings and loan holding company as 
defined by section 10(a)(1)(F) of the Home Owners' Loan Act (12 U.S.C. 
1467a(a)(1)(F)) other than the assets of its depository institution 
affiliate;
    (ii) Assets of a bank holding company that is exempt from the 
prohibitions of section 4 of the Bank Holding Company Act of 1956 
pursuant to an order issued under section 4(d) of that Act (12 U.S.C. 
1843(d)) other than the assets of its depository institution affiliate; 
or
    (iii) Assets of offices of a foreign commercial bank other than the 
assets of its United States branch or agency.
    (s) United States means the United States of America, any State or 
territory of the United States of America, the District of Columbia, 
Puerto Rico, Guam, American Samoa, and the Virgin Islands.


Sec. 563f.3  Prohibitions.

    (a) Community. A management official of a depository organization 
may not serve at the same time as a management official of an 
unaffiliated depository organization if the depository organizations in 
question (or a depository institution affiliate thereof) have offices 
in the same community.
    (b) RMSA. A management official of a depository organization may 
not serve at the same time as a management official of an unaffiliated 
depository organization if the depository organizations in question (or 
a depository institution affiliate thereof) have offices in the same 
RMSA and each depository organization has total assets of $20 million 
or more.
    (c) Major assets. A management official of a depository 
organization with total assets exceeding $1 billion (or any affiliate 
thereof) may not serve at the same time as a management official of an 
unaffiliated depository organization with total assets exceeding $500 
million (or any affiliate thereof), regardless of the location of the 
two depository organizations.


Sec. 563f.4  Interlocking relationships permitted by statute.

    The prohibitions of Sec. 563f.3 do not apply in the case of any one 
or more of the following organizations or to a subsidiary thereof:
    (a) A depository organization that has been placed formally in 
liquidation, or which is in the hands of a receiver, conservator, or 
other official exercising a similar function;
    (b) A corporation operating under section 25 or section 25A of the 
Federal Reserve Act (12 U.S.C. 601 et seq. and 12 U.S.C. 611 et seq., 
respectively) (Edge Corporations and Agreement Corporations);
    (c) A credit union being served by a management official of another 
credit union;
    (d) A depository organization that does not do business within the 
United States except as an incident to its activities outside the 
United States;
    (e) A State-chartered savings and loan guaranty corporation;
    (f) A Federal Home Loan Bank or any other bank organized solely to 
serve depository institutions (a bankers' bank) or solely for the 
purpose of providing securities clearing services and services related 
thereto for depository institutions and securities companies;
    (g) A depository organization that is closed or is in danger of 
closing as determined by the appropriate Federal depository 
institutions regulatory agency and is acquired by another depository 
organization. This exemption lasts for five years, beginning on the 
date the depository organization is acquired;
    (h)(1) A diversified savings and loan holding company (as defined 
in section 10(a)(1)(F) of the Home Owners' Loan Act (12 U.S.C. 
1467a(a)(1)(F)) with respect to the service of a director of such 
company who also is a director of an unaffiliated depository 
organization if:
    (i) Both the diversified savings and loan holding company and the 
unaffiliated depository organization notify their appropriate Federal 
depository institutions regulatory agency at least 60 days before the 
dual service is proposed to begin; and
    (ii) The appropriate regulatory agency does not disapprove the dual 
service before the end of the 60-day period.
    (2) The OTS may disapprove a notice of proposed service if it finds 
that:
    (i) The service cannot be structured or limited so as to preclude 
an anticompetitive effect in financial services in any part of the 
United States;
    (ii) The service would lead to substantial conflicts of interest or 
unsafe or unsound practices; or
    (iii) The notificant failed to furnish all the information required 
by the OTS.
    (3) The OTS may require that any interlock permitted under this 
paragraph be terminated if a change in circumstances occurs with 
respect to one of the interlocked depository organizations that would 
have provided a basis for disapproval of the interlock during the 
notice period; and
    (i) Any savings association or any savings and loan holding company 
(as defined in section 10(a)(1)(D) of the Home Owners' Loan Act) which 
has issued stock in connection with a qualified stock issuance pursuant 
to section 10(q) of such Act, except that this paragraph (i) shall 
apply only with regard to service by a single management official of 
such savings association or holding company, or any subsidiary of such 
savings association or holding company, by a single management official 
of the savings and loan holding company which purchased the stock 
issued in connection with such qualified stock issuance, and shall 
apply only when the OTS has determined that such service is consistent 
with the purposes of the Interlocks Act and the Home Owners' Loan Act.


Sec. 563f.5  Regulatory Standards exemption.

    (a) Criteria. The OTS may permit an interlock that otherwise would 
be prohibited by the Interlocks Act and Sec. 563f.3 if:
    (1) The board of directors of the depository organization (or the 
organizers of a depository organization being formed) that seeks the 
exemption provides a resolution to the OTS certifying that the 
organization, after the exercise of reasonable efforts, is unable to 
locate any other candidate from the community or RMSA, as appropriate, 
who: 

[[Page 67441]]

    (i) Possesses the level of expertise required by the depository 
organization and who is not prohibited from service by the Interlocks 
Act; and
    (ii) Is willing to serve as a management official; and
    (2) The OTS, after reviewing an application submitted by the 
depository organization seeking the exemption, determines that:
    (i) The management official is critical to the safe and sound 
operations of the affected depository organization; and
    (ii) Service by the management official will not produce an 
anticompetitive effect with respect to the depository organization.
    (b) Presumptions. The OTS applies the following presumptions when 
reviewing any application for a Regulatory Standards exemption:
    (1) An interlock has no anticompetitive effect if it involves 
depository institutions that, if merged, would not cause the post-
merger Herfindahl-Hirschman Index (HHI) to exceed 1800 and would not 
cause the HHI to increase by more than 200 points. This presumption 
shall not apply to institutions subject to the major assets prohibition 
of Sec. 563f.3(c).
    (2) A proposed management official is critical to the safe and 
sound operations of a depository institution if that official is 
approved by the OTS to serve as a director or senior executive officer 
of that institution pursuant to 12 CFR 574.9 and the institution had 
operated for less than two years, was not in compliance with minimum 
capital requirements, or otherwise was in a ``troubled condition'' as 
defined in 12 CFR 574.9 at the time the service under that section was 
approved.
    (c) Duration of interlock. An interlock permitted under this 
section may continue until the OTS notifies the affected organizations 
otherwise. The OTS may require termination of any interlock permitted 
under this section if the OTS concludes, after giving the affected 
persons the opportunity to respond, that the determinations under 
paragraph (a)(2) of this section no longer may be made.


Sec. 563f.6  Management Consignment exemption.

    (a) Criteria. The OTS may permit an interlock that otherwise would 
be prohibited by the Interlocks Act and Sec. 563f.3 if the OTS, after 
reviewing an application submitted by the depository organization 
seeking an exemption, determines that the interlock would:
    (1) Improve the provision of credit to low- and moderate-income 
areas;
    (2) Increase the competitive position of a minority- or woman-owned 
depository organization;
    (3) Strengthen the management of a depository institution that has 
been chartered for less than three years at the time an application is 
filed under this part; or
    (4) Strengthen the management of a depository institution that is 
in an unsafe or unsound condition as determined by the OTS on a case-
by-case basis.
    (b) Presumptions. The OTS applies the following presumptions when 
reviewing any application for a Management Consignment exemption:
    (1) A proposed management official is capable of strengthening the 
management of a depository institution described in paragraph (a)(3) of 
this section if that official is approved by the OTS to serve as a 
director or senior executive officer of that institution pursuant to 12 
CFR 574.9 and the institution had operated for less than two years at 
the time the service under 12 CFR 574.9 was approved; and
    (2) A proposed management official is capable of strengthening the 
management of a depository institution described in paragraph (a)(4) of 
this section if that official is approved by the OTS to serve as a 
director or senior executive officer of that institution pursuant to 12 
CFR 574.9 and the institution was not in compliance with minimum 
capital requirements or otherwise was in a ``troubled condition'' as 
defined under 12 CFR 574.9 at the time service under that section was 
approved.
    (c) Duration of interlock. An interlock granted under this section 
may continue for a period of two years from the date of approval. The 
OTS may extend this period for one additional two-year period if the 
depository organization applies for an extension at least 30 days 
before the current exemption expires and satisfies one of the criteria 
specified in paragraph (a) of this section. The provisions set forth in 
paragraph (b) of this section also apply to applications for 
extensions.


Sec. 563f.7  Change in circumstances.

    (a) Termination. A management official shall terminate his or her 
service or apply for an exemption to the Interlocks Act if a change in 
circumstances causes the service to become prohibited under that Act. A 
change in circumstances may include, but is not limited to, an increase 
in asset size of an organization, a change in the delineation of the 
RMSA or community, the establishment of an office, an acquisition, a 
merger, a consolidation, or any reorganization of the ownership 
structure of a depository organization that causes a previously 
permissible interlock to become prohibited.
    (b) Transition period. A management official described in paragraph 
(a) of this section may continue to serve the depository institution 
involved in the interlock for 15 months following the date of the 
change in circumstances. The OTS may shorten this period under 
appropriate circumstances.


Sec. 563f.8  Enforcement.

    Except as noted in this section, the OTS administers and enforces 
the Interlocks Act with respect to savings associations, savings and 
loan holding companies, and affiliates of either, and may refer any 
case of a prohibited interlocking relationship involving these 
institutions to the Attorney General of the United States to enforce 
compliance with the Interlocks Act and this part. If an affiliate of a 
savings association or savings and loan holding company is subject to 
the primary regulation of another Federal depository organization 
supervisory agency, then the OTS does not administer and enforce the 
Interlocks Act with respect to that affiliate.


Sec. 563f.9  Interlocking relationships permitted pursuant to Federal 
Deposit Insurance Act.

    A management official or prospective management official of a 
depository organization may enter into an otherwise prohibited 
interlocking relationship with another depository organization for a 
period of up to 10 years if such relationship is approved by the 
Federal Deposit Insurance Corporation pursuant to section 
13(k)(1)(A)(v) of the Federal Deposit Insurance Act, as amended (12 
U.S.C. 1823(k)(1)(A)(v)).

    Dated: December 13, 1995.
Jonathan L. Fiechter,
Acting Director.
[FR Doc. 95-30972 Filed 12-28-95; 8:45 am]
BILLING CODES 4810-33-P, 6210-01-P, 6714-01-P, 6720-01-P


Last Updated 07/17/1999 communications@fdic.gov