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Inactive Financial Institution Letters 


[Federal Register: August 2, 1996 (Volume 61, Number 150)]
[Rules and Regulations]               
[Page 40293-40311]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]

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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 26

[Docket No. 96-15]
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. 96-62]
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 final rule.

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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) are revising their rules regarding 
management interlocks. This final rule conforms the interlocks rules to 
recent statutory changes, modernizes and clarifies the rules, and 
reduces unnecessary regulatory burdens where feasible, consistent with 
statutory requirements. In so doing, it reflects comments received on 
the proposed rule and the agencies' further internal considerations.

EFFECTIVE DATE: This joint rule is effective October 1, 1996.

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, 250 E Street, SW., Washington, DC 
20219.
    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 (TDD), 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 Deale, 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 
agencies 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 regulations with these purposes in mind and are amending the 
regulations in ways designed to meet the goals of section 303(a).
    The agencies have made the following changes to their respective 
management interlocks rules in order to comply with the mandate of 
section 303(a):
     The final rules revise the definition of ``senior 
management official'' to eliminate uncertainty as to when an employee 
of a depository institution will be considered to be a senior 
management official for purposes of the Depository Institution 
Management Interlocks Act (12 U.S.C. 3201-3208) (Interlocks Act). 
Moreover, the final rules conform this definition to definitions of 
similar terms used elsewhere in the agencies' regulations.
     The final rules revise the definition of ``representative 
or nominee'' to clarify

[[Page 40294]]

that the agencies will determine that a person is acting as a 
representative or nominee on behalf of another person only when there 
is an agreement, express or implied, obligating the first person to act 
on the second person's behalf with respect to management 
responsibilities.
     The final rules reflect a reinterpretation of the 
Interlocks Act by the agencies that permits management interlocks 
within a relevant metropolitan statistical area (MSA) when either of 
the depository institutions in the MSA has assets of less than $20 
million (the agencies previously interpreted the Interlocks Act to 
permit interlocks between unaffiliated institutions in MSA only if both 
depository institutions have assets of less than $20 million). This 
expands the pool of available managerial talent for small depository 
institutions.
     In implementing the Interlocks Act's ``regulatory standards'' 
exemption (Regulatory Standards exemption) and the exemption under a 
``management official consignment program'' (Management Consignment 
exemption), the final rules contain certain presumptions and define key 
terms so as to eliminate unnecessary burdens.
     The final rules remove the provision concerning statutorily 
grandfathered management interlocks, given that it is unnecessary in 
light of the changes made to the Interlocks Act by the CDRI Act.
    The agencies believe that these changes will streamline and modify 
their respective management interlocks regulations, thus furthering the 
goals of section 303 of the CDRI Act. These changes are explained more 
fully in the discussion of the final rule and comments received.

Summary of Statutory Changes

    The CDRI Act amended the 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.1
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    \1\ 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.
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    Pursuant to the changes made by the CDRI Act, a depository 
institution seeking an exemption from the Interlocks Act's restrictions 
must qualify either for a Regulatory Standards exemption or a 
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: (1) improve the provision of 
credit to low- and moderate-income areas; (2) increase the competitive 
position of a minority- or women-owned institution; or (3) 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 a newly chartered institution or an institution 
that is in an unsafe or unsound condition).

The Proposal

    On December 29, 1995, the agencies published a joint notice of 
proposed rulemaking (proposal) (60 FR 67424) to implement these 
statutory changes. In addition, the proposal permitted interlocks 
involving two institutions located in the same relevant metropolitan 
statistical area (RMSA) if the institutions were not also located in 
the same community and if at least one of the institutions had total 
assets of less than $20 million. Finally, the proposal streamlined and 
clarified the agencies' interlocks rules in various respects.

The Final Rule and Comments Received

    The agencies received a total of 26 comments,2 some of which 
were sent to more than one agency. Commenters overwhelmingly supported 
the proposal. A few commenters, while supporting the proposal, 
suggested that the agencies make additional changes as discussed later 
in this preamble. Most of the provisions in the proposal received 
either no comments or uniformly favorable comments. Accordingly, except 
where noted in the text that follows, the agencies have adopted without 
revision the changes to their respective interlocks rules that were set 
forth in the proposal.
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    \2\ The Board received 10 comments from the public, while the 
OCC, FDIC, and OTS received 6, 6, and 4, respectively.
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    The following discussion summarizes the amendments to the agencies' 
management interlock rules and the comments received.

Authority, Purpose, and Scope

    This section in the agencies' final rules 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 identifies the types of 
institutions to which each agency's regulation applies. The OCC 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 Sec. 26.2(k).)

Definitions

Anticompetitive effect
    The final rules define the term ``anticompetitive effect'' to mean 
``a monopoly or substantial lessening of competition,'' a definition 
derived from the Bank Merger Act (12 U.S.C. 1828(c)). The term 
``anticompetitive effect'' is used in the Regulatory Standards 
exemption. Under the Regulatory Standards 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 
definition preserves the free flow of credit and other banking services 
that the Interlocks Act is designed to protect. Moreover, use of a 
definition familiar to the banking industry enables the agencies to 
accomplish the legislative purpose of

[[Page 40295]]

the Interlocks Act without imposing unnecessary regulatory burdens.
Area Median Income
    The final rules define ``area median income'' as the median family 
income for the MSA in which an institution is located or the statewide 
nonmetropolitan median family income if an institution is located 
outside an MSA. The term ``area median income'' is used in the 
definition of ``low- and moderate-income areas,'' which in turn is used 
in the implementation of the Management Consignment exemption.
Critical
    The final rules define ``critical'' as ``important to restoring or 
maintaining a depository organization's safe and sound operations.'' 
The term ``critical'' is used in 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 defines 
``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 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.
    The agencies believe that the definition adopted in these final 
rules is consistent with the legislative intent by insuring that only 
persons of demonstrated expertise and importance to the institution's 
safe and sound operations may serve pursuant to a Regulatory Standards 
exemption.
Depository Institution
    The final rules make no substantive change to the definition of 
``depository institution.'' Two commenters noted that several of the 
agencies interpret ``depository institution'' to include only those 
institutions that accept deposits (see, e.g., Board Staff Opinion of 
March 29, 1983, I F.R.R.S. 3-838; OCC No-Objection Letter No. 93-01, 
October, 1993; FDIC Interpretive Letter No. 85-27), and requested that 
the agencies clarify that these interpretations will not be affected by 
the final rules. The OCC, Board, and FDIC note that the final rules 
change neither the definition of ``depository institution'' nor the 
application of that definition, and that the interpretations cited 
remain accurate statements of the positions of these agencies.
Low- and Moderate-income Areas
    The final rules define this term as a census tract (or, if an area 
is not in a census tract, a block numbering area delineated by the 
United States Bureau of the Census) in which the median family income 
is less than 100 percent of the area median income. This term is used 
in the Management Consignment exemption that permits an otherwise 
impermissible interlock if the interlock would improve the provision of 
credit to a low- and moderate-income area. The final rules clarify that 
the agencies will evaluate whether an area is low- or moderate-income 
by comparing the median family income for the census tract to be helped 
(or, if there is no census tract, the block numbering area delineated 
by the United States Bureau of the Census) with the area median income. 
Income data will be derived from the most recent decennial census.
    One commenter requested that the agencies use a cutoff of 120 
percent of the area median income for determining whether an area is 
``low- or moderate-income.'' This commenter suggested that this higher 
cutoff would be consistent with the flexibility vested in the agencies 
to implement the Management Consignment exemption in a way designed to 
make it easier for institutions to serve economically disadvantaged 
areas.
    The agencies agree that a cutoff above 80 percent of the area 
median income is appropriate, given that ``low-income'' is defined in 
Title I, Subtitle A of the CDRI Act (titled ``Community Development 
Banking and Financial Institutions'') to mean not more than 80 percent 
of the area median income. 12 U.S.C. 4702(17). The agencies believe 
that Congress, by using the term ``moderate-income'' in addition to 
``low-income'' in section 338(b) of the CDRI Act (which created the 
Management Consignment exemption), intended for that term to apply to 
an area where the median family income exceeds the cutoff for low 
income established elsewhere in the CDRI Act.
    The agencies disagree, however, that a cutoff above 100 percent of 
area median income is appropriate. The agencies continue to believe 
that the 100 percent cutoff proposed best effectuates the Congressional 
purpose of facilitating the flow of credit to economically 
disadvantaged areas. Moreover, the threshold adopted is a commonly used 
definition for ``moderate-income'' in other statutory provisions.3
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    \3\ See, e.g., 12 U.S.C. 4502(10) (defining ``moderate-income'' 
in the context of the statute addressing government sponsored 
enterprises).
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Management Official
    The final rules define ``management official'' to include a senior 
executive officer, a director, a branch manager, 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 final rules remove the phrase ``an employee or officer with 
management functions,'' which appeared in the former rule. In its 
place, the agencies have used the term ``senior executive officer'' as 
defined by each agency in its regulation 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) (Pub. L. No. 101-73, 103 Stat. 183). 
The agencies have made this change to eliminate the uncertainty and 
attendant compliance burden created by the ambiguous term ``management 
functions.'' The final rules 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.
    One commenter requested that the agencies amend the rules to expand 
the exemption that exists for individuals whose management functions 
relate to the business of retail merchandising or manufacturing. In 
response to this request, the agencies carefully reviewed their 
respective rules and concluded that the rules as drafted are 
sufficiently broad to address the concerns expressed by the commenter. 
This commenter also requested that the agencies clarify the procedures 
by which someone may confirm that an organization complies

[[Page 40296]]

with the regulation. The agencies note that an organization may request 
from the appropriate regulator at any time confirmation that a given 
interlock complies with applicable law. The agencies have elected not 
to impose any procedural requirements in the regulation on this type of 
request.
Relevant Metropolitan Statistical Area (RMSA)
    The final rules, like the former rules, define ``relevant 
metropolitan statistical area (RMSA)'' as an MSA, a primary MSA, or a 
consolidated MSA that is not comprised of designated primary MSAs. 
However, unlike the former rules, the final rules clarify that this 
definition will be used to the extent that the Office of Management and 
Budget (OMB) defines and applies the terms MSA, primary MSA, and 
consolidated MSA. This change reflects the fact that OMB defines 
``consolidated MSA'' to include two or more primary MSAs. Given that a 
consolidated MSA, by OMB's definition, is comprised of primary MSAs, 
the reference to a consolidated MSA in the Interlocks Act and the 
agencies' regulations is inappropriate. The final rules enable 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 final rules define ``representative or nominee'' as someone who 
serves as a management official and has an obligation to act on behalf 
of someone else. The final rules remove the rest of the definition that 
appeared in the former rule, however, and insert 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. This change 
clarifies that the determination of whether someone serves a 
representative or nominee will depend on whether there is a basis to 
conclude that an agreement exists to act on someone's behalf.

Prohibitions

    The former rules prohibited interlocks in the following three 
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 of 
$20 million or more and the depository organizations (or depository 
institution affiliates of either) have depository institution offices 
in the same RMSA.4 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.
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    \4\ A community as that term is defined in the rules is smaller 
than an RMSA. There may be several communities in one RMSA.
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    The final rules amend the restriction applicable to institutions 
with assets equal to or exceeding $20 million to better conform to the 
purposes of the Interlocks Act. Whereas the former rules prohibited 
interlocks in an RMSA if one of the organizations has total assets of 
$20 million or more, the final rules 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 will continue to be prohibited, regardless of the size of 
the organizations.
    The agencies believe that this 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, the wording is 
ambiguous and 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, an interlock involving one institution 
with assets under $20 million and another institution with assets of at 
least $20 million not in the same community is not likely to lead to 
the anticompetitive conduct that the Interlocks Act is designed to 
prohibit.
    The agencies believe, moreover, that the 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.
    Every comment on this change either supported the change without 
qualification or supported the change and asked the agencies go even 
farther. A few commenters suggested that the agencies should raise the 
asset thresholds discussed earlier and/or provide blanket exceptions 
for institutions with total assets below certain levels. The agencies 
note that the Interlocks Act, which establishes the thresholds at which 
the various prohibitions apply, does not vest the agencies with 
authority to change these levels or to exempt classes of organizations 
from the statute's prohibitions. Accordingly, the agencies have not 
adopted the changes proposed by these commenters.

Interlocking Relationships Expressly Permitted by Statute

    The final rules state the exemptions found in 12 U.S.C. 3204 (1)-
(8).5 The final rules 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.
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    \5\ 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 will continue to 
list an additional exemption in its interlocks regulation that 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 will continue to list 
an additional exemption in its management interlocks regulation that 
the other agencies do not list.
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Regulatory Standards Exemption

    The final rules set forth the requirements that a depository 
organization must satisfy in order to obtain a Regulatory Standards 
exemption. The rules implement 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 candidate has 
been found after undertaking reasonable efforts to locate 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 ``reasonable efforts'' standard is 
consistent with the legislative intent.

[[Page 40297]]

    The final rules 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.6 
However, the agencies may decide that this presumption should not be 
conclusive in appropriate circumstances, such as when approval of an 
interlock request would lead to several institutions being linked by 
overlapping management.
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    \6\ See, e.g., the OCC's Bank Merger Competitive Analysis Screen 
(OCC Advisory Letter 95-4, July 18, 1995); Department of Justice 
Merger Guidelines (49 FR 26823, June 29, 1984) (applied by the 
Board); FDIC Statement of Policy: Bank Merger Transactions (54 FR 
39045, Sept. 22, 1989).
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    Second, the agencies will presume 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.7
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    \7\ This presumption also applies to individuals whose service 
as a senior executive officer is approved by the OCC pursuant to the 
standard conditions imposed on newly chartered national banks and to 
individuals whose service as a management official is approved by 
the FDIC as a condition of a grant of deposit insurance prior to the 
opening of the depository institution.
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    The final rules 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 have not adopted a specific term for a 
permitted exemption. Instead, an agency may require an institution to 
terminate the interlock if the 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.
    One commenter suggested that the agencies clarify that the 15-month 
grace period that applies when an interlock must be terminated due to a 
change in circumstances also applies in the case of a Regulatory 
Standards exemption that must be terminated. The agencies agree with 
the commenter that it is appropriate in most cases to grant a grace 
period following the termination of a Regulatory Standards exemption in 
order to minimize the disruption of the affected institution that 
otherwise might be caused by the loss of a management official.
    There may be circumstances, however, where immediate termination of 
a regulatory standards exemption would be appropriate. For instance, if 
an organization obtains an exemption on the basis of misleading 
information, the organization's primary regulator will require the 
organization to take appropriate steps to immediately remedy the 
situation. The final rules thus provide for the possibility of a grace 
period, with the caveat that the agencies may, under appropriate 
circumstances, order the immediate termination of a Regulatory 
Standards exemption.
    Another commenter suggested that the agencies limit the term of a 
Regulatory Standards exemption when the exemption is granted. This 
commenter opined that depository organizations would benefit from the 
greater certainty by avoiding questions concerning whether a director 
must vacate his or her position on a board. The agencies believe that 
the procedures in the final rules for terminating a Regulatory 
Standards exemption will provide an affected organization with ample 
certainty concerning the permissibility of continued service.

Grandfathered Interlocking Relationships--Removed

    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 satisfies the statutory criteria for obtaining an 
extension.
    The final rules 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.

Management Consignment Exemption

    The final rules implement the Management Consignment exemption, set 
forth in section 209(c) of the Interlocks Act (12 U.S.C. 3207(c)), by 
restating the statutory criteria with three clarifications. First, the 
final 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 final rules clarify that the exemption available for 
``minority- and women-owned institutions'' is available for an 
institution that is owned either by minorities or women. In analyzing 
the exemptions to the Interlocks Act 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 final rules permit 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

[[Page 40298]]

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 the [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 will permit Management Consignment 
exemptions if the management official will strengthen either a newly 
chartered institution or an institution that is in an unsafe or unsound 
condition.
    The final rules 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.8 
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.''
---------------------------------------------------------------------------

    \8\  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 an individual 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 women-owned institutions. Moreover, the final rules do 
not contain a presumption regarding effects on competition, given that 
this is not a factor to be considered by the agencies when reviewing an 
application for a Management Consignment exemption.
    The final rules 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 final rules 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.
    One commenter suggested that the agencies should be consistent in 
how they address the duration of a Management Consignment exemption 
with how the agencies address the duration of a Regulatory Standards 
exemption, and permit a Management Consignment exemption to last until 
the appropriate agency orders the interlock terminated. The statute is 
clear, however, that a Management Consignment exemption may not last 
more than one initial two-year term and one extension of up to an 
additional two years in appropriate circumstances. Accordingly, the 
agencies have not adopted the approach suggested by the commenter.

Change in Circumstances

    The final rules 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.

Paperwork Reduction Act

    OCC: The collection of information requirements contained in this 
final rule have been reviewed and approved by the Office of Management 
and Budget in accordance with the Paperwork Reduction Act of 1995 (44 
U.S.C. 3507(d)) under control number 1557-0196. 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 final 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 by the Interlocks Act, and will 
be used by the OCC to evaluate compliance with the requirements of the 
Interlocks Act by national banks and District banks. The collections of 
information are required to obtain a benefit.
    Respondents are not required to respond to the foregoing collection 
of information unless it displays a currently valid OMB control number. 
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 final 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

[[Page 40299]]

Federal Reserve System, Washington, DC 20551.
    The collection of information requirements in this final rule are 
found in 12 CFR 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 final 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.
    FDIC: The collections of information contained in this final rule 
have been reviewed and approved by the Office of Management and Budget 
under control number 3064-0118 in accordance with the Paperwork 
Reduction Act of 1995 (44 U.S.C. 3507(d)). Comments on the collections 
of information should be sent to the Office of Management and Budget, 
Paperwork Reduction Project (3604-0118), Washington, DC 20503, with 
copies of such comments to be sent to Steven F. Hanft, Office of the 
Executive Secretary, Room F-453, Federal Deposit Insurance Corporation, 
550 17th Street, NW., Washington, DC 20429.
    The collection of information requirements in this final rule 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 by the Interlocks Act as amended 
by section 338 of the CDRI Act, and will be used by the FDIC to 
evaluate compliance with the requirements of the Interlocks Act by 
insured nonmember banks. 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 
rule have been reviewed and approved by the Office of Management and 
Budget for review in accordance with the Paperwork Reduction Act of 
1995 (44 U.S.C. 3507(d)). Comments on the collection of information 
should be sent to the Office of Management and Budget, Paperwork 
Reduction Project (1550-0051), Washington, DC 20503, with copies to the 
Business Transactions Division (1550-0051), Office of Thrift 
Supervision, 1700 G Street, NW., Washington, DC.
    The collection of information requirements in this final 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 by the Interlocks Act, and 
will be used by the OTS to evaluate compliance with the requirements of 
the Interlocks Act by savings associations. The collections of 
information are required to obtain a benefit.
    Respondents are not required to respond to the foregoing collection 
of information unless it displays a currently valid OMB control number. 
The likely respondents are 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 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 final rule.
    Pursuant to section 605(b) of the RFA, the agencies hereby certify 
that this rule will not have a significant economic impact on a 
substantial number of small entities. The agencies expect that this 
rule will not (1) have significant secondary or incidental effects on a 
substantial number of small entities or (2) create any additional 
burden on small entities. The changes to the exemptions are required by 
the Interlocks Act. The agencies have added presumptions that will 
streamline and simplify the application procedures for obtaining an 
exemption from the Interlocks Act prohibitions, and have defined key 
terms used in the provisions implementing these exemptions in a way 
that is intended to eliminate any unnecessary burden. As noted in the 
preamble discussion of the changes made by the final rule, the agencies 
have made substantive changes that will permit more flexibility to 
institutions with total assets of less than $20 million, clarified the 
circumstances under which someone will be deemed to be a 
``representative or nominee,'' and amended the definition of ``senior 
management official'' so as to provide greater clarity and to conform 
this definition with definitions of similar terms used in other 
regulations.
    The impact of these changes will be to minimize, to the extent 
possible, the costs of complying with this final rule.

Executive Order 12866

    OCC and OTS: The OCC and OTS have determined that this rule 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 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 the rule.
    The OCC and OTS have determined that this final 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.

[[Page 40300]]

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.

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 revises 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 202, shares held by an individual include shares held by 
members of his or her immediate family. ``Immediate family'' means 
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 to 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 a 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 census tracts (or, if an 
area is not in a census tract, block numbering areas delineated by the 
United States Bureau of the Census) where the median family income is 
less than 100 percent of the area median income.
    (m) Management official. (1) The term management official means:
    (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.

[[Page 40301]]

    (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 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 will not have an anticompetitive effect if it 
involves depository organizations 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

[[Page 40302]]

apply to depository organizations 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:
    (i) 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
    (ii) 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 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 depository 
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. A management official may continue serving the 
depository organization involved in the interlock for a period of 15 
months following the date of the order to terminate the interlock. The 
OCC may shorten this period under appropriate circumstances.


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 women-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 (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 organization 
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 provided 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 entities 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: July 22, 1996.
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 revises 
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 202, shares held

[[Page 40303]]

by an individual include shares held by members of his or her immediate 
family. ``Immediate family'' means 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 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 to 
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 a city, town, or village, and 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 census tracts (or, if an 
area is not in a census tract, block numbering areas delineated by the 
United States Bureau of the Census) where the median family income is 
less than 100 percent of the area median income.
    (l) Management official. (1) The term management official means:
    (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, or any office of a depository 
holding company.
    (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

[[Page 40304]]

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 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 
institution's 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 will not have an anticompetitive effect if it 
involves depository organizations 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 depository organizations 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:
    (i) 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
    (ii) 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 depository 
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. A management official may continue serving the depository 
organization involved in the interlock for a period of 15 months 
following the date of the order to terminate the interlock. The Board 
may shorten this period under appropriate circumstances.


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 women-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

[[Page 40305]]

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 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 provided 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 entities 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: July 10, 1996.
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 
revises 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 
section 202, shares held by an individual include shares held by 
members of his or her immediate family. ``Immediate family'' means 
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 to 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 a 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

[[Page 40306]]

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 census tracts (or, if an 
area is not in a census tract, block numbering areas delineated by the 
United States Bureau of the Census) where the median family income is 
less than 100 percent of the area median income.
    (l) Management official. (1) The term management official means:
    (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 are 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

[[Page 40307]]

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.
    (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 will not have an anticompetitive effect if it 
involves depository organizations 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 depository organizations 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:
    (i) 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
    (ii) 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 depository 
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. A management official may continue serving the depository 
organization involved in the interlock for a period of 15 months 
following the date of the order to terminate the interlock. The FDIC 
may shorten this period under appropriate circumstances.


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 women-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,

[[Page 40308]]

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 provided 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 entities 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.

    Dated at Washington, DC, this 16th day of July, 1996.

    By order of the Board of Directors.

Federal Deposit Insurance Corporation
Robert E. Feldman,
Deputy Executive Secretary.

Office of Thrift Supervision

12 CFR Chapter V

Authority and Issuance

    For the reasons set out in the joint preamble, the OTS revises 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 202, shares held by an individual include shares held by 
members of his or her immediate family. ``Immediate family'' means 
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 
to 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 a 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 census tracts (or, if an 
area is not in a census tract, block numbering areas delineated by the 
United States Bureau of the Census) where the median family income is 
less than 100 percent of the area median income.
    (l) Management official. (1) The term management official means:
    (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

[[Page 40309]]

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 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:
    (1) Any Federal savings association (as defined in section 3(b)(2) 
of the Federal Deposit Insurance Act (12 U.S.C. 1813(b)(2));
    (2) 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
    (3) 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 (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; 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

[[Page 40310]]

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:
    (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 will not have an anticompetitive effect if it 
involves depository organizations 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 depository organizations 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:
    (i) 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
    (ii) 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 depository 
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. A management official may continue serving the depository 
organization involved in the interlock for a period of 15 months 
following the date of the order to terminate the interlock, unless the 
order terminating the interlock provides otherwise.


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 women-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 organization 
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 provided 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 entities 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

[[Page 40311]]

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: July 1, 1996.
Jonathan L. Fiechter,
Acting Director.
[FR Doc. 96-19400 Filed 8-1-96; 8:45 am]
BILLING CODE 4810-33-P; 6210-01-P; 6714-01-P; 6720-01-P
Last Updated 11/9/2011 communications@fdic.gov