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4000 - Advisory Opinions


Definition of "Affiliate" Under the Depository Institutions Management Interlocks Act

FDIC-79-12

November 7, 1979

Pamela E. F. LeCren, Attorney

You have requested an opinion from the FDIC on whether or not *** and *** are affiliated under the Depository Institution Management Interlocks Act (Title II of FIRIRCA). That Act prohibits nonaffiliated financial institutions from sharing management officials. If the two institutions are affiliated, the prohibitions of the Act do not apply and they may freely share management officials.

Section 202(3) of the Act defines affiliated institutions to be, among other things, two institutions that are commonly owned; i.e., two institutions of which more than fifty percent of the stock of each is beneficially owned by the same person or group of persons.1 According to the information presented to us in your letter, *** is a subsidiary of ***, a one bank holding company. *** is a subsidiary of ***, a one bank holding company. Fifty-five percent of *** stock is held by ***. Eighty-three percent of *** stock is held by ***. *** and *** are in turn both controlled by members of the *** family.2 In short, the two banks, although subsidiaries of two separate bank holding companies, are controlled by the same group of persons (albeit through the bank holding companies).

It is our opinion, that for the purposes of the Depository Institution Management Interlocks Act (and its regulations), beneficial ownership of stock in a bank holding company can be traced through the holding company to the subsidiary. Thus, in this particular instance, because *** owns more than fifty percent of the stock of *** and the *** family owns one-hundred percent of the stock in ***, a group of persons (the *** family) owns more than fifty percent of the stock of ***. Futhermore, because more than fifty percent of the stock of *** is owned by ***, the majority of the stock of which is in turn owned by the *** family, the same group of persons can be said to beneficially own more than fifty percent of the stock of both *** and ***. In brief, *** and *** are, in our opinion, affiliated for the purposes of the Depository Institution Management Interlocks Act.

If you have any questions regarding the substance of this opinion or the Depository Institution Management Interlocks Act in general, please contact me.

1 Section 348.2(b) of the final regulations implementing Title II (12 C.F.R. Part 348) interprets the statutory definition of affiliate so as to deal with sham affiliations. The considerations raised by that section are not relevant under the facts presented here. Go back to Text

2 One-hundred percent of the outstanding shares of *** are held by the *** family and over eighty-nine percent of the shares of *** are so held. Go back to Text


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