[Federal Register: August 11, 1998 (Volume 63, Number 154)]
[Proposed Rules]
[Page 43051-43058]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr11au98-49]
[[Page 43051]]
_______________________________________________________________________
Part VII
Department of the Treasury
Office of the Comptroller of the Currency
12 CFR Part 26
Federal Reserve Board
12 CFR Part 212
Federal Deposit Insurance Corporation
12 CFR Part 348
Department of the Treasury
Office of Thrift Supervision
12 CFR Part 563f
_______________________________________________________________________
Management Official Interlocks; Proposed Rule
[[Page 43052]]
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
12 CFR Part 26
[Docket No. 98-09]
RIN 1557-AB60
FEDERAL RESERVE BOARD
12 CFR Part 212
[Docket No. R-1013]
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. 98-58]
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 notice of proposed rulemaking.
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SUMMARY: The Office of the Comptroller of the Currency (OCC), Board of
Governors of the Federal Reserve System (Board), Federal Deposit
Insurance Corporation (FDIC), and Office of Thrift Supervision (OTS)
(the Agencies) propose to revise their rules regarding management
interlocks. The proposal conforms the interlocks rules to recent
statutory changes, modernizes and clarifies the rules, and reduces
unnecessary regulatory burdens where feasible, consistent with
statutory requirements.
DATES: Comments must be received by October 13, 1998.
ADDRESSES: Comments should be directed to:
OCC: Office of the Comptroller of the Currency, Communications
Division, 250 E Street, SW., Washington, DC 20219, Attention: Docket
No. 98-09. Comments will be available for public inspection and
photocopying at the same location. In addition, comments may be sent by
facsimile transmission to FAX number (202) 874-5274 or by Internet mail
to REGS.COMMENTS@OCC.TREAS.GOV.
Board: Jennifer J. Johnson, Secretary, Board of Governors of the
Federal Reserve System, Docket No. R-1013, 20th Street and Constitution
Avenue, NW., Washington, DC 20551. Comments addressed to Ms. Johnson
may also be delivered to the Board's mail room between 8:45 a.m. and
5:15 p.m., and to the security control room outside of those hours.
Both the mail room and control room are accessible from the courtyard
entrance on 20th Street between Constitution Avenue and C Street, NW.
Comments may be inspected in room MP-500 between 9:00 a.m. and 5:00
p.m., except as provided in 12 CFR 261.12 of the Board's Rules
Regarding Availability of Information, 12 CFR 261.12.
FDIC: Written comments should be addressed to Robert E. Feldman,
Executive Secretary, Attention: Comments/OES, Federal Deposit Insurance
Corporation, 550 17th Street, NW, Washington, DC 20429. Comments may be
hand delivered to the guard station at the rear of the 550 17th Street
Building (located on F Street), on business days between 7:00 a.m. and
5:00 p.m. (Fax number: (202) 898-3838; Internet address:
comments@fdic.gov). Comments may be inspected and photocopied in the
FDIC Public Information Center, Room 100, 801 17th Street, NW,
Washington, DC, between 9:00 a.m. and 4:30 p.m. on business days.
OTS: Manager, Dissemination Branch, Records Management and
Information Policy, Office of Thrift Supervision, 1700 G Street, NW.,
Washington, DC 20552, Attention Docket No. 98-58. These submissions may
be hand-delivered to 1700 G Street, NW., from 9:00 to 5:00 on business
days; sent by facsimile transmission to FAX number (202) 906-7755, or
may be sent by e-mail to: public.info@ots.treas.gov. Those commenting
by e-mail should include their name and telephone number. Comments will
be available for inspection at 1700 G Street, NW., from 9:00 until 4:00
on business days.
FOR FURTHER INFORMATION CONTACT: OCC: Sue E. Auerbach, Senior Attorney,
Bank Activities and Structure, (202) 874-5300; Emily R. McNaughton,
National Bank Examiner, Senior Policy Analyst, Core Policy Development,
(202) 874-5190; Jackie Durham, Bank Organization and Structure, Senior
Licensing Policy Analyst, (202) 874-5060; or Ursula Pfeil, Attorney,
Legislative and Regulatory Activities, (202) 874-5090.
Board: Thomas M. Corsi, Senior Counsel, (202) 452-3275, or Michelle
Q. Profit, Attorney, (202) 736-5599, Legal Division, Board of Governors
of the Federal Reserve System. For the hearing impaired only,
Telecommunication Device for Deaf (TTD), Diane Jenkins, (202) 452-3544.
FDIC: Curtis Vaughn, Examination Specialist, Division of
Supervision, (202) 898-6759; John Jilovec, Examination Specialist,
Division of Supervision, (202) 898-8958; or Mark Mellon, Counsel,
Regulation and Legislation Section, Legal Division, (202) 898-3854.
OTS: David Bristol, Senior Attorney, Business Transactions
Division, Chief Counsel's Office, (202) 906-6461; or Joseph M. Casey,
Supervision Policy, (202) 906-5741.
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
interlocks between unaffiliated depository organizations, regardless of
size, if both organizations have an office 1 in the same
community (the community prohibition). Interlocks are also prohibited
between unaffiliated depository organizations if both organizations
have total assets of $20 million or more and have offices 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 the organizations
have 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, 212.2,
348.2, and 563f.2.
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Section 2210 of the Economic Growth and Regulatory Paperwork
Reduction Act of 1996 (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
[[Page 43053]]
of the organizations.2 The EGRPR Act raised the thresholds
to $2.5 billion and $1.5 billion, respectively. The revision 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
Sec. 4 of the Bank Holding Company Act to include only the assets of
their depository institution affiliates. See 12 CFR 26.2(r),
212.2(q), 348.2(q), and 563f.2(r).
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Section 2210(b) of the EGRPR Act permanently extended the
grandfather exemptions found in 12 U.S.C. 3205(a) and (b). These
exemptions were due to expire in 1998. The EGRPR Act repealed section
3205(c), which mandated Agency review of 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. Discussion of Proposed Regulations
The proposal reflects these statutory changes. This proposal also
renews an earlier proposal for a small market share exemption that the
Board, OCC, and FDIC had advanced before enactment of the CDRI Act. The
Agencies invite comments on all aspects of this proposal.
A. Definitions
The Agencies' current regulations define key terms implementing the
Interlocks Act. A number of these definitions were added or revised in
1996 to implement the CDRI Act.4 With the repeal of the
specific exemptive standards in the CDRI Act, two of these definitions
have become unnecessary and would be removed.
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\4\ See 61 FR 40293 (August 2, 1996).
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Anticompetitive Effect
The current rule defines ``anticompetitive effect'' as a ``monopoly
or substantial lessening of competition.'' Under the new statutory
scheme, the substance of this definition is the sole criterion for
gauging whether to grant an exemption under the Agencies' general
exemptive authority. Because the proposed regulations would employ this
phrase in only one provision, a separate definition is unnecessary.
Critical
The current regulations use the term ``critical'' in connection
with the Regulatory Standards exemption created by the CDRI Act. Since
the EGRPR Act eliminates the Regulatory Standards exemption, a
regulatory definition of ``critical'' is unnecessary.
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 such institution or any affiliate thereof 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 such
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 proposal would 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 provide appropriate notice of the change to depository
institutions and depository institution holding companies. The Agencies
invite comment on other types of market changes that may warrant
subsequent adjustments to the major assets prohibition.
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
CDRI 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 proposed rule would
remove these regulatory exemptions.
However, the rule proposed under the amended exemptive authority,
discussed in the following section, includes rebuttable presumptions
that interlocks in certain circumstances would not result in a monopoly
or substantial lessening of competition. These presumptions are based
on criteria that the Agencies used before the passage of the CDRI Act,
and which Congress employed in creating the Management Consignment
exemption.
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 such service would
not result in ``a monopoly or substantial lessening of competition.''
To implement this authority, the Agencies are proposing 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. The process for
obtaining such exemptions will be set out in each Agency's procedural
regulations or, in the case of the OCC, in its Corporate Manual.
Since 1979, when regulations implementing the Interlocks Act were
first promulgated, the Agencies have recognized that interlocks
involving certain classes of depository organizations present a reduced
risk to competition, and that, by enlarging the pool of management
available to such organizations, competition could be enhanced. Thus,
in the initial interlocks rules published in 1979, the Agencies
reserved the authority to permit interlocks to strengthen newly
chartered organizations, troubled organizations, organizations in low-
or moderate-income areas, and organizations controlled or managed by
minorities or women. The authority to permit interlocks in such
circumstances was deemed ``necessary for the promotion of competition
over the long term.'' 5 Prior to the CDRI Act, these
exemptions were granted to meet the need for qualified management. The
Management Consignment exemption under the CDRI Act was generally
available to the same four classes of organizations, but on a more
limited basis.
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\5\ See 44 FR 42161, 42165 (July 19, 1979).
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With the EGRPR Act's restoration of the broad exemptive authority
under the Interlocks Act, the Agencies again have
[[Page 43054]]
broad authority to grant exemptions that will not adversely affect
competition. The Agencies believe that interlocks involving the four
classes of organizations previously identified may provide management
expertise needed to enhance such organizations' ability to compete.
Accordingly, the Agencies propose 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 2 years; or
(4) the depository organization is deemed to be in ``troubled
condition'' under regulations implementing section 914 of the Financial
Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C.
1831i). 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 presumptions are designed to provide greater flexibility to
classes of organizations that may have greater need for seasoned
management. 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.
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.
Interlocks that are based on a rebuttable presumption would be
allowed to continue for three years, unless otherwise provided in the
approval order. Nothing in the proposed rule would prevent an
organization from applying for an extension of an interlock exemption
granted under a presumption if the factors continued to apply. The
organization would also be free to utilize any other exemption that may
be available. The Agencies propose that any interlock approved under
this section may continue so long as it would not result in a monopoly
or substantial lessening of competition, becomes unsafe or unsound, or
is subject to a condition requiring termination at a specific time.
E. Small Market Share Exemption
In 1994, the OCC, Board, and FDIC published notices of proposed
rulemaking seeking comment on a proposed market share
exemption.6 The proposed exemption would have been available
for interlocks involving institutions that, on a combined basis, would
control less than 20 percent of the deposits in a community or relevant
MSA. These agencies published small market share exemption proposals
pursuant to the broad exemptive authority vested in the agencies prior
to the CDRI Act. After the CDRI Act restricted the agencies' broad
authority, the OCC, Board and FDIC withdrew their
proposals.7 The broad exemptive authority under the EGRPR
Act provides authority for a small market share exemption. Accordingly,
the OCC, Board and FDIC, joined by the OTS, are issuing this proposal
for the small market share exemption.
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\6\ See OCC, 59 FR 29740 (June 9, 1994); Board, 59 FR 7909
(February 17, 1994); and FDIC, 59 FR 18764 (April 20, 1994).
\7\ See 60 FR 67424 (December 29, 1995) for withdrawal by the
OCC and the Board; and 60 FR 7139 (February 7, 1995) for withdrawal
by the FDIC.
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The exemption is intended to enlarge the pool of management talent
upon which depository institutions may draw, resulting in more
competitive, better-managed institutions without causing significant
anticompetitive effects. The Interlocks Act, by discouraging common
management among financial institutions, seeks to prevent adverse
effects on competition in the provision of products and services that
financial institutions offer. Where depository institutions dominate a
large portion of the market, these risks are significant. When a
particular market is served by many institutions, however, the risks
diminish that depository institutions with interlocking relationships
can adversely affect the available products and services in their
markets.
The Agencies believe that the combined share of the deposits of two
institutions provides a meaningful assessment of the capacity of the
two institutions to control credit and related services in their
market. Accordingly, the Agencies propose to exempt interlocking
service involving two unaffiliated depository organizations that
together control no more than 20 percent of the deposits in any RMSA or
community in which the organizations have offices. Organizations
claiming the exemption would be required to 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 (i.e.
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 would not be available for interlocks subject to
the major assets prohibition.
The exemptions would continue to apply as long as the organizations
meet the applicable conditions. Any event, such as expansion or a
merger, that causes the level of deposits controlled to exceed 20
percent of deposits in any RMSA or community would be considered to be
a change in circumstances. Accordingly, the depository organizations
would have 15 months (or such shorter period as directed by the
appropriate Agency) to address the prohibited interlock by termination
or otherwise. Conforming changes relating to termination have been made
to the Agencies' change of circumstances provisions.
No prior Agency approval would be required in order to claim the
proposed small market share exemption. Management is responsible for
compliance with the terms of the exemption and for maintaining
sufficient supporting documentation. To determine their eligibility for
the exemptions, depository organizations would need to obtain
appropriate deposit share data from the FDIC. This information is
collected in the Summary of Deposits published by the FDIC and is
available for institutions regulated by the Agencies on the Internet at
http://www.fdic.gov.
The most recently available deposit share data will be used to
determine whether organizations are entitled to the exemptions. Thus,
the depository organization seeking the exemption is entitled to rely
upon the deposit share data that has been compiled for the previous
year, until the next year's data has been distributed.
The Agencies request comments on all aspects of the proposed small
market share exemption. In particular, the Agencies request comments
regarding the following issues:
1. Whether 20 percent of the deposits in a community or RMSA is an
appropriate limit for the application of the exemptions.
2. Whether deposit data collected by the FDIC in connection with
the Report of Condition and Income should be used to determine
eligibility for the exemptions, and whether alternative
[[Page 43055]]
sources of information concerning deposit share should be acceptable
for determining availability of the exemptions.
3. Whether calculation of a depository organization's eligibility
for exemption from the community prohibition will create undue burdens,
and, if so, how the burdens could be reduced (for example, by basing
the exemption on the total asset size of the institutions involved).
4. Whether there is a significant risk that the purposes of the
Interlocks Act would be evaded through ``hub and spoke'' arrangements.
Under these arrangements, directors of one depository organization
would serve as directors of different unaffiliated organizations that
have, in the aggregate, a deposit share in excess of the 20% limit.
III. Paperwork Reduction Act
The Agencies invite comment on:
(1) Whether the proposed collection of information contained in
this notice of proposed rulemaking is necessary for the proper
performance of each Agency's functions, including whether the
information has practical utility;
(2) The accuracy of each Agency's estimate of the burden of the
proposed information collection;
(3) Ways to enhance the quality, utility, and clarity of the
information to be collected;
(4) Ways to minimize the burden of the information collection on
respondents, including the use of automated collection techniques or
other forms of information technology; and
(5) Estimates of capital or start-up costs and costs of operation,
minutes, and purchase of services to provide information.
Recordkeepers are not required to respond to this collection of
information unless it displays a currently valid OMB control number.
OCC: The collection of information requirements contained in this
notice of proposed rulemaking have been submitted to the Office of
Management and Budget for review in accordance with the Paperwork
Reduction Act of 1995 (44 U.S.C. 3507(d)). Comments on the collections
of information should be sent to the Office of Management and Budget,
Paperwork Reduction Project (1557-0196), Washington, DC 20503, with
copies to the Legislative and Regulatory Activities Division (1557-
0196), Office of the Comptroller of the Currency, 250 E Street, SW,
Washington, DC 20219.
The collection of information requirements in this proposed rule
are found in 12 CFR 26.4(h)(1)(i), 26.6(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. The likely
respondents are 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 respondents: None.
Board: In accordance with section 3506 of the Paperwork Reduction
Act of 1995 (44 U.S.C. Ch. 35; 5 CFR 1320 Appendix A.1), the Board
reviewed the proposed rule under the authority delegated to the Board
by the Office of Management and Budget. Comments on the collections of
information should be sent to the Office of Management and Budget,
Paperwork Reduction Project (7100-0046, 7100-0134, 7100-0171, 7100-
0266), Washington, DC 20503, with copies of such comments to be sent to
Mary M. McLaughlin, Chief, Financial Reports Section, Division of
Research and Statistics, Mail Stop 97, Board of Governors of the
Federal Reserve System, Washington, DC 20551.
The collection of information requirements in this proposed
rulemaking are found in 12 CFR 212.4(h)(1)(i), 212.6(b), 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.
Estimated number of respondents: 6 applicants per year.
Estimated average annual burden per respondent: 4 hours.
Estimated annual frequency of reporting: Not applicable (one-time
application).
Estimated total annual reporting burden: 24 hours.
Start-up costs to respondents: None.
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 notice of
proposed rulemaking have been submitted to the Office of Management and
Budget for review in accordance with the Paperwork Reduction Act of
1995 (44 U.S.C.3507(d)). Comments on the collections of information
should be sent to the Office of Management and Budget, Paperwork
Reduction Project (3604-0118), Washington, DC 20503, with copies of
such comments to be sent to Steven F. Hanft, Office of the Executive
Secretary, Federal Deposit Insurance Corporation, 550 17th Street, NW.,
Washington, DC 20429.
The collection of information requirements in this proposed
regulation are found in 12 CFR 348.4(i)(1)(i), 348.6(b), and 348.6(c).
This information is required to evidence compliance with the
requirements of the Interlocks Act. The likely respondents are insured
nonmember banks.
Estimated number of respondents: 5 applicants per year.
Estimated average annual burden per respondent: 4 hours.
Estimated annual frequency of reporting: Not applicable (one-time
application).
Estimated total annual reporting burden: 20 hours.
OTS: The collection of information requirements contained in this
notice of proposed rulemaking have been submitted to the Office of
Management and Budget for review in accordance with the Paperwork
Reduction Act of 1995 (44 U.S.C. 3507(d)). Comments on the collection
of information should be sent to the Office of Management and Budget,
Paperwork Reduction Project (1550-0051), Washington, DC 20503, with
copies to the Office of Thrift Supervision, 1700 G Street, NW.,
Washington, DC.
The information collection requirements in this proposed rule are
found in 12 CFR 563f.4(h)(1)(i), 563f.6(b) and 563f.6(c). The OTS
requires this information as evidence of compliance with the
requirements of the Interlocks Act by savings associations. The likely
respondents are savings associations.
Estimated annual frequency of reporting: Not applicable (one-time
application).
Estimated total annual reporting burden: 32 hours.
Estimated average annual hours per respondent: 4 hours.
Estimated number of respondents: 8.
Start-up costs to respondents: None.
IV. Regulatory Flexibility Act
Pursuant to section 605(b) of the Regulatory Flexibility Act (RFA)
(5 U.S.C. 605(b)) the Agencies hereby certify that this proposed rule
will not have a significant economic impact on a substantial number of
small entities. The Agencies expect that this proposal will not: (1)
Have significant secondary or incidental effects on a substantial
number of small entities; or (2) create any additional burden on small
entities. The proposed regulations relax the criteria for obtaining an
exemption from the interlocks prohibitions, and specifically address
the needs of small
[[Page 43056]]
entities by creating the small market share exemption. Accordingly, a
regulatory flexibility analysis is not required.
V. Executive Order 12866
The OCC and OTS have determined that this proposal is not a
significant regulatory action under Executive Order 12866.
VI. Unfunded Mandates Act of 1995
The OCC and OTS have determined that the proposed rule will not
result in expenditures by State, local, and tribal governments, or by
the private sector, of more than $100 million in any one year.
Accordingly, neither the OCC nor the OTS has prepared a budgetary
impact statement or specifically addressed the regulatory alternatives
considered.
List of Subjects
12 CFR Part 26
Antitrust, Holding companies, Management official interlocks,
National banks, Reporting and recordkeeping requirements.
12 CFR Part 212
Antitrust, Banks, banking, Federal Reserve System, 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 proposes to
amend 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.
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 applications 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 would not result in a monopoly or
substantial lessening of competition, or be 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 that causes a
previously permissible interlock to become prohibited.
* * * * *
Dated: July 14, 1998.
Julie L. Williams,
Acting 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 proposes
to amend 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. 3201-3208; 15 U.S.C. 19.
Sec. 212.2 [Amended]
2. Section 212.2 is amended by removing paragraphs (b) and (f) and
[[Page 43057]]
redesignating paragraphs (c) through (r) as paragraphs (b) through (p),
respectively.
3. Section 212.3 is amended by revising paragraph (c) to read as
follows:
Sec. 212.3 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
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.
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 applications 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 would not result in a monopoly or
substantial lessening of competition, or be 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, July 20, 1998.
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 proposes to amend 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 is revised 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
Wage Earners and Clerical Workers, not seasonally adjusted, with
rounding to the nearest $100 million.
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 applications for an exemption under
this section, the FDIC will apply a
[[Page 43058]]
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) of this chapter.
(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 would not result in a monopoly or
substantial lessening of competition, or be 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.
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 18th day of May, 1998.
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 proposes to
amend 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.
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 applications 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;
(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. 574.9(a)(5) 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 would not result in a monopoly or
substantial lessening of competition, or be 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.
* * * * *
By the Office of Thrift Supervision.
Dated: May 27, 1998.
Ellen Seidman,
Director.
[FR Doc. 98-20848 Filed 8-10-98; 8:45 am]
BILLING CODE OTS: 6720-01-P (25%); OCC: 4810-33-P (25%); Board: 6210-
01-P (25%) FDIC: 6714-01-P (25%);
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