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Home > News & Events > Inactive Financial Institution Letters 




Inactive Financial Institution Letters 


[Federal Register: September 24, 1999 (Volume 64, Number 185)]
[Rules and Regulations]               
[Page 51673-51681]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24se99-2]                         

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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 26

[Docket No. 99-11]
RIN 1557-AB60

FEDERAL RESERVE BOARD

12 CFR Part 212

[Docket No. R-0907]

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 348

RIN 3064-ACO8

DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Part 563f

[Docket No. 99-36]
RIN 1550-AB07

 
Management Official Interlocks

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

ACTION: Joint 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) 
(the Agencies) are revising their rules regarding management 
interlocks. The 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.

EFFECTIVE DATE: This joint rule is effective January 1, 2000.

FOR FURTHER INFORMATION CONTACT: OCC: Emily R. McNaughton, National 
Bank Examiner, Senior Policy Analyst, Core Policy Development (202) 
874-5190; Jackie Durham, Senior Licensing Policy Analyst, Bank 
Organization and Structure (202) 874-5060; Sue E. Auerbach, Senior 
Attorney, Bank Activities and Structure (202) 874-5300; or Mark 
Tenhundfeld, Assistant Director, Legislative and Regulatory Activities 
(202) 874-5090. Office of the Comptroller of the Currency, 250 E 
Street, SW, Washington, DC 20219.
    Board: Thomas M. Corsi, Senior Counsel (202) 452-3275, or Andrew 
Baer, Attorney (202) 452-2246, 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, Chief Counsel's Office (202) 906-6461; or Joseph M. Casey, 
Supervision Policy, (202) 906-5741, Office of Thrift Supervision, 1700 
G Street, NW, Washington, DC 20552.

SUPPLEMENTARY INFORMATION:

I. Background

    The Depository Institution Management Interlocks Act (12 U.S.C. 
3201-3208) (the Interlocks Act or Act) generally prohibits bank 
management officials from serving simultaneously with two unaffiliated 
depository institutions or their holding companies (depository 
organizations). The scope of the prohibition depends on the size and 
location of the organizations involved. For instance, the Act prohibits

[[Page 51674]]

interlocks between unaffiliated depository organizations, regardless of 
size, if each organization has an office 1 in the same 
community (the community prohibition). Interlocks are also prohibited 
between unaffiliated depository organizations if each organization has 
total assets of $20 million or more and has an office in the same 
relevant metropolitan statistical area (RMSA) (the RMSA prohibition). 
The Interlocks Act also prohibits interlocks between unaffiliated 
depository organizations, regardless of location, if each organization 
has total assets exceeding specified thresholds (the major assets 
prohibition).
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    \1\ Each of the Agencies' regulations generally define 
``office'' as a home or branch office. See 12 CFR 26.2 (OCC), 212.2 
(Board), 348.2 (FDIC), and 563f.2 (OTS).
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Summary of Statutory Changes

    Section 2210 of the Economic Growth and Regulatory Paperwork 
Reduction Act of 1996 (Pub. L. 104-208, 110 Stat. 3009-409) (the EGRPR 
Act) amended sections 204, 206 and 209 of the Interlocks Act (12 U.S.C. 
3203, 3205 and 3207). Section 2210(a) of the EGRPR Act amended the 
Interlocks Act by changing the thresholds for the major assets 
prohibition under 12 U.S.C. 3203. Prior to the EGRPR Act, management 
officials of depository organizations with total assets exceeding $1 
billion were prohibited from serving as management officials of 
unaffiliated depository organizations with assets exceeding $500 
million, regardless of the location of the organizations.2 
The EGRPR Act raised the thresholds to $2.5 billion and $1.5 billion, 
respectively. The amendment also authorized the Agencies to adjust the 
thresholds by regulation, as necessary to allow for inflation or market 
conditions.
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    \2\ The Agencies define ``total assets'' of diversified savings 
and loan holding companies and bank holding companies exempt from 
section 4 of the Bank Holding Company Act (12 U.S.C. 1843) to 
include only the assets of their depository institution affiliates. 
See 12 CFR 26.2(r) (OCC), 212.2(q) (Board), 348.2(q) (FDIC), and 
563f.2(r) (OTS).
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    Section 2210(b) of the EGRPR Act permanently extended the 
grandfather exemptions for management officials whose service began 
before November 10, 1978, which appear at 12 U.S.C. 3205(a) and (b) 
which were due to expire in 1998. The EGRPR Act repealed section 
3205(c) which mandated Agency review of these grandfathered interlocks 
before March 1995.
    The EGRPR Act also amended 12 U.S.C. 3207 to provide that the 
Agencies may adopt regulations that permit service by a management 
official that would otherwise be prohibited by the Interlocks Act, if 
such service would not result in a monopoly or substantial lessening of 
competition. This change repealed the specific ``regulatory standards'' 
and ``management consignment'' exemptions added by the Riegle Community 
Development and Regulatory Improvement Act of 1994 (CDRI 
Act),3 and restored the Agencies' broad authority to create 
regulatory exemptions to the statutory prohibitions on interlocks.
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    \3\ The Agencies adopted final regulations implementing the 
management interlocks provisions of the CDRI Act, effective October 
1, 1996. See 61 FR 40293 (August 2, 1996).
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II. The Proposal

    On August 11, 1998, the Agencies published a joint notice of 
proposed rulemaking (the Proposal) (63 FR 43052) to implement the 
statutory changes made by the EGRPR Act. In addition, the Proposal 
renewed an earlier proposal for a small market share exemption that the 
Board, OCC, and FDIC had advanced before enactment of the CDRI Act.

III. The Final Rule and Comments Received

    The Agencies received a total of seven comments,4 some 
of which were sent to more than one agency. Commenters generally 
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 proposed changes received 
either no comments or uniformly favorable comments. Accordingly, except 
where noted in the text that follows, the Agencies have adopted the 
Proposal without change. The following discussion summarizes the 
amendments to the Agencies' management interlocks rules and the 
comments received.
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    \4\ The Board received 4 comments from the public, while the 
OCC, FDIC, and OTS received 4, 6, and 5 respectively.
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A. Definitions

    The Agencies' regulations define key terms implementing the 
Interlocks Act. The Agencies added or revised a number of these 
definitions in 1996 to implement the CDRI Act.5 With the 
repeal of the specific exemptive standards in the CDRI Act, two of 
these definitions became unnecessary, specifically, ``anticompetitive 
effect'' and ``critical''. The Agencies therefore proposed that they be 
removed.
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    \5\ See 61 FR 40293 (August 2, 1996).
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    The Agencies received only one comment on the proposed elimination 
of these terms. The commenter agreed that these definitions should be 
removed. The Agencies therefore adopt this provision without any 
changes.

B. Major Assets Prohibition

    Prior to the EGRPR Act, if a depository institution or depository 
holding company had total assets exceeding $1 billion, a management 
official of the institution or any of its affiliates could not serve as 
a management official of any other nonaffiliated depository institution 
or depository holding company having total assets exceeding $500 
million or as a management official of any affiliates of the other 
institution, regardless of location. The EGRPR Act revised the asset 
thresholds for the major assets prohibition from $1 billion and $500 
million to $2.5 billion and $1.5 billion, respectively. The legislation 
also authorized the Agencies to adjust the threshold from time to time 
to reflect inflation or market changes.
    The Agencies proposed to amend the regulations to reflect the new 
threshold amounts, and to add a mechanism providing for periodic 
adjustments of the thresholds. The adjustment would be based on changes 
in the Consumer Price Index for Urban Wage Earners and Clerical Workers 
(the Consumer Price Index). In those years when changes in the Consumer 
Price Index would change the thresholds by more than $100 million, the 
Agencies will adjust the threshold and announce the change by a final 
rule without notice and opportunity for comment published in the 
Federal Register. For those years in which changes in the Consumer 
Price Index would not change the thresholds by more than $100 million, 
the Agencies will not adjust the threshold. The Agencies invited 
comment on other types of market changes that may warrant subsequent 
adjustments to the major assets prohibition. The Agencies, however, 
wish to clarify that if they do not adjust the threshold to reflect a 
Consumer Price Index change in any given year, they will consider the 
change for that year in computing adjustments to the threshold in 
subsequent years.
    Two commenters supported the proposed adjustment of the major asset 
thresholds based on the Consumer Price Index. One commenter, however, 
suggested that the Agencies notify financial institutions of threshold 
amounts at least annually even if they are not adjusted.
    The Agencies believe that the $100 million benchmark will make it 
easy for the banking industry to keep track of the thresholds while 
preserving the flexibility to reflect changes in the economy that are 
significant enough to

[[Page 51675]]

warrant changing the asset thresholds. Accordingly, the Agencies adopt 
the mechanism providing for periodic adjustments of the thresholds set 
forth in the Proposal without any changes.

C. Regulatory Standards and Management Consignment Exemptions

    The current regulations contain Regulatory Standards and Management 
Consignment exemptions which were predicated on section 3207 of the 
Interlocks Act. The EGRPR Act removed the specific exemptions from the 
Interlocks Act and substituted a general authority for the Agencies to 
create exemptions by regulation. Accordingly, the Proposal recommended 
removal of these regulatory exemptions.
    The Agencies received only one comment on this provision. The 
commenter supported removal of the Regulatory Standards and Management 
Consignment exemptions. The Agencies find the removal of the exemptions 
appropriate in light of their statutory repeal and therefore adopt this 
provision as set forth in the Proposal without any changes.

D. General Exemptive Authority

    Section 2210(c) of the EGRPR Act authorizes the Agencies to adopt 
regulations permitting service by a management official that would 
otherwise be prohibited by the Interlocks Act, if that official's 
service would not result in ``a monopoly or substantial lessening of 
competition.'' To implement this authority, the Agencies proposed to 
exempt otherwise prohibited management interlocks where the dual 
service would not result in a monopoly or substantial lessening of 
competition, and would not otherwise threaten safety and soundness. As 
noted in the preamble to the Proposal, the process for obtaining such 
exemptions will be set out in each Agency's procedural regulations or, 
in the case of the OCC, in the Management Interlocks booklet of the 
Comptroller's Corporate Manual.
    The Agencies also proposed to create a rebuttable presumption that 
an interlock would not result in a monopoly or substantial lessening of 
competition, if: (1) The depository organization primarily serves low-
or moderate-income areas; (2) the depository organization is controlled 
or managed by members of a minority group or women; (3) the depository 
institution has been chartered for less than two years; or (4) the 
depository organization is deemed to be in a troubled condition'' under 
regulations implementing section 914 of the Financial Institutions 
Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 1831i).
    Under the proposal, interlocks granted in reliance on one of these 
presumptions may continue for three years unless the Agency granting 
the interlock provides otherwise in writing.
    Three commenters supported the general exemption. One commenter 
suggested that the rebuttable presumption be extended to depository 
institutions that have been chartered for less than five years rather 
than the two-year limit suggested in the Proposal. The commenter argued 
that the time period should be extended to take into consideration the 
challenges facing a de novo depository institution in its first or 
second market cycle. Another commenter, however, cautioned against 
allowing an interlock to continue when the original reason for granting 
the interlock in the first place no longer applies. For example, the 
commenter noted that if an interlock is granted to strengthen an 
institution in a troubled condition and the bank is still in that 
status at the end of the three-year time period, the appropriate 
supervisory agency should consider other courses of action instead of 
allowing the interlock to continue.
    A fourth commenter stated that the justification offered by the 
Agencies was insufficient to establish a rebuttable presumption for a 
depository organization controlled or managed by members of a minority 
group or women or for a newly chartered depository institution. The 
commenter further questioned the reason for presuming that interlocks 
in these conditions automatically would not result in a monopoly or 
reduction of competition. The commenter argued that proper management 
should be addressed in the chartering process and that the burden of 
management oversight rests there. The commenter therefore recommended 
that these two categories be dropped from the list of those eligible 
for the rebuttable presumption.
    In response, the Agencies note that when the regulatory exceptions 
for these two categories of interlocks were created in 1979, the 
Agencies found the exceptions were appropriate for the promotion of 
competition over the long term and to encourage the development and 
preservation of these depository organizations, thereby contributing to 
the convenience and needs of the public and the well-being of the 
financial community. The Agencies continue to believe that the 
exception for a depository organization controlled or managed by 
members of a minority group or women does not create an unfair 
advantage but instead recognizes that it has historically been more 
difficult for institutions controlled by women and minorities to 
recruit seasoned management and that, accordingly, competition to serve 
traditionally underserved markets may have suffered. By permitting 
interlocks that improve the quality of management in minority and 
women-owned institutions, the Agencies believe that these institutions 
are better able to compete with other institutions in the relevant 
market to serve traditionally underserved customers and markets. 
Similarly, because de novo entrants into a market are presumed to 
enhance competition in that market, the Agencies believe that an 
interlock that improves the management of newly chartered institutions 
also enhances competition.
    For these reasons, the Agencies have retained the two categories of 
rebuttable presumptions. As noted by the Agencies in the Proposal, 
however, a claim that factors exist giving rise to a presumption does 
not preclude an Agency from denying a request for an exemption if the 
Agency finds that the interlock nevertheless would result in a monopoly 
or substantial lessening of competition. See 63 FR 43054.
    The Proposal stated that these presumptions would be applied in a 
manner consistent with the Agencies' past analysis of the factors to 
meet the legitimate needs of the institutions and organizations 
involved for qualified and skilled management. The Proposal further 
stated that the definitions of ``area median income'' and ``low-and 
moderate-income areas'' added to the regulations in 1996 to implement 
the CDRI Act amendments would be retained to provide guidance as to 
when an organization would qualify for one of the presumptions. Under 
the Proposal, interlocks based on a rebuttable presumption would be 
allowed to continue for three years, unless otherwise provided in the 
approval order. The Proposal would not prevent an organization from 
applying for an extension of an interlock exemption if the factors 
continued to apply. The organization would also be free under the 
Proposal to utilize any other exemption that may be available. The 
Agencies proposed that any interlock approved under this section may 
continue so long as it would not result in a monopoly or a substantial 
lessening of competition, becomes unsafe or unsound, or is subject to a 
condition requiring termination at a specific time. The Agencies are 
adopting the proposed section without any changes.
    The Agencies also decline to extend the eligibility period for the 
rebuttable

[[Page 51676]]

presumption to depository institutions that have been chartered for 
less than five years rather than the two-year limit as suggested by 
another commenter. The Agencies believe that extending the rebuttable 
presumption to depository institutions that have been chartered for 
less than five years would cause de novo depository organizations to 
rely on interlocking service, rather than to obtain independent 
management from other more appropriate sources. Once a de novo 
depository institution is granted a general exemption, the exemption 
would continue for a period of three years.

E. Small Market Share Exemption

    The Proposal sought comment on an exemption for interlocks 
involving institutions that, on a combined basis, control less than 20 
percent of the deposits in a community or relevant MSA. The Agencies 
proposed the small market share exemption to enlarge the pool of 
management talent upon which depository institutions may draw, thereby 
resulting in more competitive, better managed institutions without 
causing significant anticompetitive effects. As stated in the Proposal, 
financial institutions seeking to form an interlock pursuant to the 
small market share exemption must determine their eligibility by using 
deposit share data published by the FDIC in its Summary of Deposits.
    All seven commenters supported the small market share exemption. In 
addition, five commenters found the FDIC Summary of Deposits to be the 
best available database for determining eligibility for the exception 
(with the other two commenters expressing no opinion on this question). 
Four commenters did not believe that institutions would abuse this 
exception by developing webs of interlocking relationships (hub and 
spoke interlocks). One of these four commenters urged the Agencies to 
approach such interlocks on a case-by-case basis.
    Four commenters stated that 20 percent of deposits was an 
appropriate threshold to determine eligibility for the exception. One 
commenter in this group recommended, however, that the Agencies 
periodically reexamine the appropriateness of the 20 percent limit in 
light of the declining market shares of banks generally. Another 
commenter argued that the Agencies should increase the threshold to 30 
percent due to a shortage of talent in some small towns. A second 
commenter suggested that the Agencies adopt a higher percentage for 
depository organizations in small communities. This commenter noted 
that depository organizations in sparsely populated areas often control 
a large share of deposits and that there would be no benefit in 
depriving small or rural banks of eligibility for this exemption. Two 
commenters suggested that credit union deposits should be taken into 
account when ascertaining the total amount of deposits in a particular 
community.
    The Agencies agree with the majority of commenters that 20 percent 
of deposits within the relevant community is the appropriate threshold 
to determine eligibility for the small market share exemption. While 
there will be highly concentrated markets where this threshold will not 
affect institutions' ability to form interlocks, the Agencies believe 
that interlocks between unaffiliated institutions that together control 
more than 20 percent of the deposits in a market create the risk that 
the interlocked institutions will be able to adversely affect the 
availability or terms of credit in that market. The Agencies note, 
however, that the rule permits institutions that do not qualify for the 
small market share exemption to apply for a general exemption. The 
general exemption is available even to institutions that control more 
than 20 percent of the deposits in the relevant market if the 
institutions are able to demonstrate that the interlock will not result 
in a monopoly or substantial lessening of competition and would not 
present safety and soundness concerns.
    The Agencies do not agree with the commenters' suggestion of 
including data on credit union deposits along with depository 
institution deposits when determining the total amount of deposits in a 
given market. The Agencies continue to believe 6 that the 
deposit data maintained in the FDIC's Summary of Deposits, which does 
not include credit union data, provides a reliable approximation of the 
market for a given location. To the extent that credit unions hold a 
significant amount of the total deposits in a given market, this 
information may be used to demonstrate that an interlock will not 
result in a monopoly or substantial lessening of competition under the 
general exemption. This approach is consistent with the Agencies' 
treatment of credit union deposits in the merger context, where the 
Agencies consider credit union deposits as one of many mitigating 
factors if a merger transaction exceeds a specified 
threshold.7
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    \6\ The Agencies' small market share exemption proposal in 1994 
also did not include credit union deposit data in the determination 
of the market.
    \7\ The National Credit Union Administration in its proposed 
rulemaking to revise its management interlocks regulation, however, 
considers credit union deposits when determining the total amount of 
deposits in a given market. See 63 FR 57947 (October 29, 1998).
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    The small market share exemption criteria remain as outlined in the 
Proposal. Organizations claiming the exemption must determine the 
market share in each RMSA and community in which both depository 
organizations (or their depository institution affiliates) have 
offices. The relevant market used for the small market share exception 
(that is, the RMSAs or communities in which both depository 
organizations or their depository institution affiliates have offices) 
are the same markets described in the community and RMSA prohibitions. 
The small market share exemption is not available for interlocks 
subject to the major assets prohibition.
    The exemptions continue to apply as long as the organizations meet 
the applicable conditions. Any event, such as an expansion or merger, 
that causes the level of deposits controlled to exceed 20 percent of 
deposits in any RMSA or community is considered a change in 
circumstances. Accordingly, the depository organizations have 15 months 
(or such shorter period as directed by the appropriate Agency) to 
address the prohibited interlock. Conforming changes relating to 
termination have been made to the Agencies' change of circumstances 
provisions.
    No prior Agency approval is required in order to claim the proposed 
small market share exemption. Management is responsible for complying 
with the terms of a small market share exemption and for maintaining 
sufficient supporting documentation. Each depository organization must 
maintain records sufficient to support its determination of eligibility 
for the exemption and must reconfirm that determination on an annual 
basis.

IV. Effective Date of Final Rule

    Subject to certain exceptions, 12 U.S.C. 4802(b) provides that new 
regulations and amendments to regulations prescribed by a federal 
banking agency which impose additional reporting, disclosures, or other 
new requirements on an insured depository institution shall take effect 
on the first day of a calendar quarter which begins on or after the 
date on which the regulations are published in final form. In addition, 
the Administrative Procedure Act generally provides that rules will 
become effective 30 days after publication. 5 U.S.C. 553. Accordingly, 
compliance with the final rule is not mandatory until the effective

[[Page 51677]]

date provided earlier in this document. Section 4802(b), however, also 
permits any person subject to the regulation to comply with the 
regulation voluntarily, prior to the effective date. Consequently, 
affected insured depository institutions may elect to comply 
voluntarily with the final rule immediately. If an insured depository 
institution or foreign bank elects to comply voluntarily with any 
section of the management interlocks rules, the institution or bank 
must comply with the entire part.

V. Paperwork Reduction Act

    The Agencies may not conduct or sponsor, and an organization is not 
required to respond to, an information collection unless it displays a 
currently valid OMB control number. The OMB control numbers are listed 
below.

OCC: 1557-0196
Board: 7100-0134
FDIC: 3604-0118
OTS: 1550-0051

    The Agencies sought comment on the burden estimates for the 
information collections listed below and received no comments that 
specifically addressed the burden stemming from these information 
collections.
    OCC: The collection of information requirements contained in this 
final rule have been approved by the Office of Management and Budget in 
accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507). 
Persons interested in commenting on these requirements should send 
comments to the Office of Management and Budget, Paperwork Reduction 
Project (1557-0196), Washington, D.C. 20503, with copies to the 
Communications Division, Third Floor, Attention: 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), 26.6(b), and 26.6(c). This information 
is required to evidence compliance with the requirements of the 
Interlocks Act by national banks and District banks.
    Estimated average annual burden hours per respondent: 4 hours.
    Estimated number of respondents: 7.
    Estimated total annual reporting burden: 29 hours.
    Start-up costs to correspondents: 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 rule under the authority delegated to the Board by the 
Office of Management and Budget.
    The collection of information requirements in the final rule are 
found in 12 CFR 212.4(h)(1)(i), 212.5(a)(2), 212.6(b), and 212.6(c). 
This information is required to evidence compliance with the Interlocks 
Act. The respondents are state member banks and subsidiary depository 
institutions of bank holding companies (for-profit financial 
institutions, including small businesses).
    Estimated number of respondents: 6 applicants per year.
    Estimated average annual burden per respondent: 4 hours.
    Estimated annual frequency of reporting: One-time application.
    Estimated total annual reporting burden: 24 hours.
    Start-up costs to respondents: None.
    The Board has a continued interest in the public's opinions of 
Federal Reserve collections of information. At any time, comments 
regarding the burden estimate, or any other aspect of this collection 
of information, including suggestions for reducing the burden, may be 
sent to: Secretary, Board of Governors of the Federal Reserve System, 
20th and C Streets, N.W., Washington, DC 20551; and to the Office of 
Management and Budget, Paperwork Reduction Project (7100-0134), 
Washington, DC 20503.
    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 3604-0118 in accordance with the Paperwork 
Reduction Act of 1995 (44 U.S.C. 3507). Comments on the collections of 
information should be sent to the Office of Management and Budget, 
Paperwork Reduction Project (3604-0118), Washington, D.C. 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.
    OTS: The collection of information requirements in this rule have 
been approved by the Office of Management and Budget in accordance with 
the Paperwork Reduction Act of 1995 (44 U.S.C. 3507) under OMB control 
number 1550-0051.
    Persons interested in commenting on these requirements should send 
comments to the Office of Management and Budget, Paperwork Reduction 
Project (1550-0051), Washington, DC 20503, with copies to the 
Regulations and Legislation Division, Chief Counsel's Office, Office of 
Thrift Supervision, 1700 G St., NW., Washington, DC 20552.
    Under the Paperwork Reduction Act of 1995, no persons are required 
to respond to a collection of information unless it displays a 
currently valid OMB control number. The valid OMB control number 
assigned to the collection of information in this final rule is 
displayed at 12 CFR 506.1.
    The collection of information requirements are found in 12 CFR 
563f.4(h)(1)(i), 563f.6(b) and 563f.6(c). OTS requires this information 
to evidence compliance with the Management Interlocks Act by savings 
associations. The likely respondents are savings associations and their 
holding companies.

VI. 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 statement explaining 
the factual basis 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 create any additional burden on small entities. The rule 
relaxes the criteria for obtaining an exemption from the interlocks 
prohibitions, and specifically addresses the needs of small entities by 
creating the small market share exemption. Accordingly, a regulatory 
flexibility analysis is not required.

VII. Small Business Regulatory Enforcement Fairness Act

    Title II of the Small Business Regulatory Enforcement Fairness Act 
of 1996 (SBREFA) 8 provides generally for agencies to report 
rules to Congress and the General Accounting Office for review. The 
reporting requirement is triggered when a Federal agency issues a final 
rule. The Agencies will file the appropriate reports with Congress and 
the GAO as required by SBREFA. The Office of Management and Budget has 
determined that the rules promulgated by the Agencies do not constitute 
``major rules'' as defined by SBREFA.
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    \8\ Pub. L. 104-121, 110 Stat. 857.

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[[Page 51678]]

VIII. Executive Order 12866

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

IX. 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.

X. Assessment of Impact of Federal Regulation on Families

    The Agencies have determined that this amendment will not affect 
family well-being within the meaning of section 654 of the Treasury 
Department Appropriations Act, 1999, enacted as part of the Omnibus 
Consolidated and Emergency Supplemental Appropriations Act, 1999 (Pub. 
L. 105-277, 112 Stat. 2681).

List of Subjects

12 CFR Part 26

    Antitrust, Banks, banking, Holding companies, Management official 
interlocks, National banks, Reporting and recordkeeping requirements.

12 CFR Part 212

    Antitrust, Banks, banking, Holding companies, Management official 
interlocks, Reporting and recordkeeping requirements.

12 CFR Part 348

    Antitrust, Banks, banking, Holding companies, Reporting and 
recordkeeping requirements.

12 CFR Part 563f

    Antitrust, Holding companies, Reporting and recordkeeping 
requirements, Savings associations.

Office of the Comptroller of the Currency

12 CFR Chapter I

Authority and Issuance

    For the reasons set out in the joint preamble, the OCC amends 
chapter I of title 12 of the Code of Federal Regulations as follows:

PART 26--MANAGEMENT OFFICIAL INTERLOCKS

    1. The authority citation for part 26 continues to read as follows:

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


Sec. 26.2  [Amended]

    2. Section 26.2 is amended by removing paragraphs (b) and (f) and 
redesignating paragraphs (c) through (s) as paragraphs (b) through (q), 
respectively.
    3. Section 26.3 is amended by revising paragraph (c) to read as 
follows:


Sec. 26.3  Prohibitions.

* * * * *
    (c) Major assets. A management official of a depository 
organization with total assets exceeding $2.5 billion (or any affiliate 
of such an organization) may not serve at the same time as a management 
official of an unaffiliated depository organization with total assets 
exceeding $1.5 billion (or any affiliate of such an organization), 
regardless of the location of the two depository organizations. The OCC 
will adjust these thresholds, as necessary, based on the year-to-year 
change in the average of the Consumer Price Index for the Urban Wage 
Earners and Clerical Workers, not seasonally adjusted, with rounding to 
the nearest $100 million. The OCC will announce the revised thresholds 
by publishing a final rule without notice and comment in the Federal 
Register.

    4. Section 26.5 is revised to read as follows:


Sec. 26.5  Small market share exemption.

    (a) Exemption. A management interlock that is prohibited by 
Sec. 26.3 is permissible, if:
    (1) The interlock is not prohibited by Sec. 26.3(c); and
    (2) The depository organizations (and their depository institution 
affiliates) hold, in the aggregate, no more than 20 percent of the 
deposits in each RMSA or community in which both depository 
organizations (or their depository institution affiliates) have 
offices. The amount of deposits shall be determined by reference to the 
most recent annual Summary of Deposits published by the FDIC for the 
RMSA or community.
    (b) Confirmation and records. Each depository organization must 
maintain records sufficient to support its determination of eligibility 
for the exemption under paragraph (a) of this section, and must 
reconfirm that determination on an annual basis.
    5. Section 26.6 is revised to read as follows:


Sec. 26.6  General exemption.

    (a) Exemption. The OCC may by order issued following receipt of an 
application, exempt an interlock from the prohibitions in Sec. 26.3 if 
the OCC finds that the interlock would not result in a monopoly or 
substantial lessening of competition and would not present safety and 
soundness concerns.
    (b) Presumptions. In reviewing an application for an exemption 
under this section, the OCC will apply a rebuttable presumption that an 
interlock will not result in a monopoly or substantial lessening of 
competition if the depository organization seeking to add a management 
official:
    (1) Primarily serves low-and moderate-income areas;
    (2) Is controlled or managed by persons who are members of a 
minority group, or women;
    (3) Is a depository institution that has been chartered for less 
than two years; or
    (4) Is deemed to be in ``troubled condition'' as defined in 12 CFR 
5.51(c)(6).
    (c) Duration. Unless a specific expiration period is provided in 
the OCC approval, an exemption permitted by paragraph (a) of this 
section may continue so long as it does not result in a monopoly or 
substantial lessening of competition, or is unsafe or unsound. If the 
OCC grants an interlock exemption in reliance upon a presumption under 
paragraph (b) of this section, the interlock may continue for three 
years, unless otherwise provided by the OCC in writing.
    6. Section 26.7 is amended by revising paragraph (a) to read as 
follows:


Sec. 26.7  Change in circumstances.

    (a) Termination. A management official shall terminate his or her 
service or apply for an exemption if a change in circumstances causes 
the service to become prohibited. A change in circumstances may include 
an increase in asset size of an organization, a change in the 
delineation of the RMSA or community, the establishment of an office, 
an increase in the aggregate deposits of the depository organization, 
or an acquisition, merger, consolidation, or any reorganization of the 
ownership structure of a depository organization

[[Page 51679]]

that causes a previously permissible interlock to become prohibited.
* * * * *
    Dated: July 12, 1999.
John D. Hawke, Jr.,
Comptroller of the Currency.

Federal Reserve System

12 CFR Chapter II

Authority and Issuance

    For the reasons set out in the joint preamble, the Board amends 
chapter II of title 12 of the Code of Federal Regulations as follows:

PART 212--MANAGEMENT OFFICIAL INTERLOCKS

    1. The authority citation for part 212 continues to read as 
follows:

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


Sec. 212.2  [Amended]

    2. Section 212.2 is amended by removing paragraphs (b) and (f) and 
redesignating paragraphs (c) through (r) as paragraphs (b) through (p), 
respectively.
    3. Section 212.3 is amended by revising paragraphs (b) and (c) to 
read as follows:


Sec. 212.3  Prohibitions.

* * * * *
    (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, in the case of depository institutions, 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 $2.5 billion (or any affiliate 
of such an organization) may not serve at the same time as a management 
official of an unaffiliated depository organization with total assets 
exceeding $1.5 billion (or any affiliate of such an organization), 
regardless of the location of the two depository organizations. The 
Board will adjust these thresholds, as necessary, based on the year-to-
year change in the average of the Consumer Price Index for the Urban 
Wage Earners and Clerical Workers, not seasonally adjusted, with 
rounding to the nearest $100 million. The Board will announce the 
revised thresholds by publishing a final rule without notice and 
comment in the Federal Register.
    4. Section 212.5 is revised to read as follows:


Sec. 212.5  Small market share exemption.

    (a) Exemption. A management interlock that is prohibited by 
Sec. 212.3 is permissible, if:
    (1) The interlock is not prohibited by Sec. 212.3(c); and
    (2) The depository organizations (and their depository institution 
affiliates) hold, in the aggregate, no more than 20 percent of the 
deposits in each RMSA or community in which both depository 
organizations (or their depository institution affiliates) have 
offices. The amount of deposits shall be determined by reference to the 
most recent annual Summary of Deposits published by the FDIC for the 
RMSA or community.
    (b) Confirmation and records. Each depository organization must 
maintain records sufficient to support its determination of eligibility 
for the exemption under paragraph (a) of this section, and must 
reconfirm that determination on an annual basis.
    5. Section 212.6 is revised to read as follows:


Sec. 212.6  General exemption.

    (a) Exemption. The Board may, by agency order, exempt an interlock 
from the prohibitions in Sec. 212.3, if the Board finds that the 
interlock would not result in a monopoly or substantial lessening of 
competition, and would not present safety and soundness concerns.
    (b) Presumptions. In reviewing an application for an exemption 
under this section, the Board will apply a rebuttable presumption that 
an interlock will not result in a monopoly or substantial lessening of 
competition if the depository organization seeking to add a management 
official:
    (1) Primarily serves low- and moderate-income areas;
    (2) Is controlled or managed by persons who are members of a 
minority group, or women;
    (3) Is a depository institution that has been chartered for less 
than two years; or
    (4) Is deemed to be in ``troubled condition'' as defined in 12 CFR 
225.71.
    (c) Duration. Unless a shorter expiration period is provided in the 
Board approval, an exemption permitted by paragraph (a) of this section 
may continue so long as it does not result in a monopoly or substantial 
lessening of competition, or is unsafe or unsound. If the Board grants 
an interlock exemption in reliance upon a presumption under paragraph 
(b) of this section, the interlock may continue for three years, unless 
otherwise provided by the Board in writing.
    6. Section 212.7 is amended by revising paragraph (a) to read as 
follows:


Sec. 212.7  Change in circumstances.

    (a) Termination. A management official shall terminate his or her 
service or apply for an exemption if a change in circumstances causes 
the service to become prohibited. A change in circumstances may include 
an increase in asset size of an organization, a change in the 
delineation of the RMSA or community, the establishment of an office, 
an increase in the aggregate deposits of the depository organization, 
or an acquisition, merger, consolidation, or reorganization of the 
ownership structure of a depository organization that causes a 
previously permissible interlock to become prohibited.
* * * * *
    By order of the Board of Governors of the Federal Reserve 
System.

    Dated at Washington, DC, this 13th day of September, 1999.

Board of Governors of the Federal Reserve System.
Jennifer J. Johnson,
Secretary of the Board.

Federal Deposit Insurance Corporation

12 CFR Chapter III

Authority and Issuance

    For the reasons set forth in the joint preamble, the Board of 
Directors of the FDIC amends chapter III of title 12 of the Code of 
Federal Regulations as follows:

PART 348--MANAGEMENT OFFICIAL INTERLOCKS

    1. The authority citation for part 348 continues to read as 
follows:

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


Sec. 348.2  [Amended]

    2. Section 348.2 is amended by removing paragraphs (b) and (f) and 
redesignating paragraphs (c) through (r) as paragraphs (b) through (p), 
respectively.
    3. Section 348.3 is amended by revising paragraph (c) to read as 
follows:


Sec. 348.3  Prohibitions.

* * * * *
    (c) Major assets. A management official of a depository 
organization with total assets exceeding $2.5 billion (or any affiliate 
of such an organization) may not serve at the same time as a management 
official of an unaffiliated depository organization with total assets 
exceeding $1.5 billion (or any affiliate of such an organization), 
regardless of the location of the two depository organizations. The 
FDIC will adjust these thresholds, as necessary, based on the year-to-
year change in the average of the Consumer Price Index for the Urban

[[Page 51680]]

Wage Earners and Clerical Workers, not seasonally adjusted, with 
rounding to the nearest $100 million. The FDIC will announce the 
revised thresholds by publishing a final rule without notice and 
comment in the Federal Register.
    4. Section 348.5 is revised to read as follows:


Sec. 348.5  Small market share exemption.

    (a) Exemption. A management interlock that is prohibited by 
Sec. 348.3 is permissible, if:
    (1) The interlock is not prohibited by Sec. 348.3(c); and
    (2) The depository organizations (and their depository institution 
affiliates) hold, in the aggregate, no more than 20 percent of the 
deposits in each RMSA or community in which both depository 
organizations (or their depository institution affiliates) have 
offices. The amount of deposits shall be determined by reference to the 
most recent annual Summary of Deposits published by the FDIC for the 
RMSA or community.
    (b) Confirmation and records. Each depository organization must 
maintain records sufficient to support its determination of eligibility 
for the exemption under paragraph (a) of this section, and must 
reconfirm that determination on an annual basis.
    5. Section 348.6 is revised to read as follows:


Sec. 348.6  General exemption.

    (a) Exemption. The FDIC may by agency order exempt an interlock 
from the prohibitions in Sec. 348.3 if the FDIC finds that the 
interlock would not result in a monopoly or substantial lessening of 
competition and would not present safety and soundness concerns.
    (b) Presumptions. In reviewing an application for an exemption 
under this section, the FDIC will apply a rebuttable presumption that 
an interlock will not result in a monopoly or substantial lessening of 
competition if the depository organization seeking to add a management 
official:
    (1) Primarily serves low-and moderate-income areas;
    (2) Is controlled or managed by persons who are members of a 
minority group, or women;
    (3) Is a depository institution that has been chartered for less 
than two years; or
    (4) Is deemed to be in ``troubled condition'' as defined in 
Sec. 303.101(c).
    (c) Duration. Unless a shorter expiration period is provided in the 
FDIC approval, an exemption permitted by paragraph (a) of this section 
may continue so long as it does not result in a monopoly or substantial 
lessening of competition, or is unsafe or unsound. If the FDIC grants 
an interlock exemption in reliance upon a presumption under paragraph 
(b) of this section, the interlock may continue for three years, unless 
otherwise provided by the FDIC in writing.
    (d) Procedures. Procedures for applying for an exemption under this 
section are set forth in 12 CFR 303.250.
    6. Section 348.7 is amended by revising paragraph (a) to read as 
follows:


Sec. 348.7  Change in circumstances.

    (a) Termination. A management official shall terminate his or her 
service or apply for an exemption if a change in circumstances causes 
the service to become prohibited. A change in circumstances may include 
an increase in asset size of an organization, a change in the 
delineation of the RMSA or community, the establishment of an office, 
an increase in the aggregate deposits of the depository organization, 
or an acquisition, merger, consolidation, or reorganization of the 
ownership structure of a depository organization that causes a 
previously permissible interlock to become prohibited.
* * * * *
    By order of the Board of Directors.

    Dated at Washington, DC, this 31st day of August, 1999.

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

Office of Thrift Supervision

12 CFR Chapter V

Authority and Issuance

    For the reasons set out in the joint preamble, the OTS amends 
chapter V of title 12 of the Code of Federal Regulations as follows:

PART 563f--MANAGEMENT OFFICIAL INTERLOCKS

    1. The authority citation for part 563f continues to read as 
follows:

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

Sec. 563f.2  [Amended]

    2. Section 563f.2 is amended by removing paragraphs (b) and (f) and 
redesignating paragraphs (c) through (s) as paragraphs (b) through (q), 
respectively.
    3. Section 563f.3 is amended by revising paragraph (c) to read as 
follows:


Sec. 563f.3  Prohibitions.

* * * * *
    (c) Major assets. A management official of a depository 
organization with total assets exceeding $2.5 billion (or any affiliate 
of such an organization) may not serve at the same time as a management 
official of an unaffiliated depository organization with total assets 
exceeding $1.5 billion (or any affiliate of such an organization), 
regardless of the location of the two depository organizations. The OTS 
will adjust these thresholds, as necessary, based on the year-to-year 
change in the average of the Consumer Price Index for the Urban Wage 
Earners and Clerical Workers, not seasonally adjusted, with rounding to 
the nearest $100 million. The OTS will announce the revised thresholds 
by publishing a final rule without notice and comment in the Federal 
Register.
    4. Section 563f.5 is revised to read as follows:


Sec. 563f.5  Small market share exemption.

    (a) Exemption. A management interlock that is prohibited by 
Sec. 563f.3 is permissible, if:
    (1) The interlock is not prohibited by Sec. 563f.3(c); and
    (2) The depository organizations (and their depository institution 
affiliates) hold, in the aggregate, no more than 20 percent of the 
deposits in each RMSA or community in which both depository 
organizations (or their depository institution affiliates) have 
offices. The amount of deposits shall be determined by reference to the 
most recent annual Summary of Deposits published by the FDIC for the 
RMSA or community.
    (b) Confirmation and records. Each depository organization must 
maintain records sufficient to support its determination of eligibility 
for the exemption under paragraph (a) of this section, and must 
reconfirm that determination on an annual basis.
    5. Section 563f.6 is revised to read as follows:


Sec. 563f.6  General exemption.

    (a) Exemption. The OTS may by agency order exempt an interlock from 
the prohibitions in Sec. 563f.3 if the OTS finds that the interlock 
would not result in a monopoly or substantial lessening of competition 
and would not present safety and soundness concerns. A depository 
organization may apply to the OTS for an exemption as provided by 
Sec. 516.2 of this chapter.
    (b) Presumptions. In reviewing an application for an exemption 
under this section, the OTS will apply a rebuttable presumption that an 
interlock will not result in a monopoly or substantial lessening of 
competition if the depository organization seeking to add a management 
official:
    (1) Primarily serves low- and moderate-income areas;
    (2) Is controlled or managed by persons who are members of a 
minority group, or women;

[[Page 51681]]

    (3) Is a depository institution that or has been chartered for less 
than two years; or
    (4) Is deemed to be in ``troubled condition'' as defined in 
Sec. 563.555 of this chapter.
    (c) Duration. Unless a shorter expiration period is provided in the 
OTS approval, an exemption permitted by paragraph (a) of this section 
may continue so long as it does not result in a monopoly or substantial 
lessening of competition, or is unsafe or unsound. If the OTS grants an 
interlock exemption in reliance upon a presumption under paragraph (b) 
of this section, the interlock may continue for three years, unless 
otherwise provided by the OTS in writing.
    6. Section 563f.7 is amended by revising paragraph (a) to read as 
follows:


Sec. 563f.7  Change in circumstances.

    (a) Termination. A management official shall terminate his or her 
service or apply for an exemption if a change in circumstances causes 
the service to become prohibited. A change in circumstances may include 
an increase in asset size of an organization, a change in the 
delineation of the RMSA or community, the establishment of an office, 
an increase in the aggregate deposits of the depository organization, 
or an acquisition, merger, consolidation, or reorganization of the 
ownership structure of a depository organization that causes a 
previously permissible interlock to become prohibited.
* * * * *

    Dated: June 30, 1999.
Ellen Seidman,
Director.
[FR Doc. 99-24881 Filed 9-23-99; 8:45 am]
BILLING CODE 4810-33-P, 6210-01-P, 6714-01-P, 6720-01-P


Last Updated 09/24/1999 communications@fdic.gov