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FEDERA L RESERVE BA N K OF DALLAS
DALLAS, TEXAS
75222
Circular No. 80-90
M a y 8, 1980
AMENDMENTS TO
REGULATION L - MANAGEMENT OFFICIAL INTERLOCKS
AND RULES REGARDING DELEGATION OF AUTHORITY
TO ALL MEMBER BANKS,
BANK HOLDING COMPANIES,
AND OTHERS CONCERNED IN THE
ELEVENTH FEDERAL RESERVE DISTRICT:
The Board o f Governors o f the Federal Reserve System is
amending Regulation L, "Management O fficial Interlocks,", to make certain
clarifying and technical changes, as well as add several definitions.
In
addition, the final amendments add a provision that extends the compliance
period for depository organizations experiencing a disruptive loss of man
agem ent as a result of a change in circum stances.
The Rules Regarding
Delegation o f Authority are being amended e f f e c t iv e May 9, 1980, to delegate
to the Reserve Banks the authority to grant an additional grace period for the
termination of management o fficia l interlocks that becom e prohibited as a
result of certain conditions as provided in regulations issued under the
Depository Institutions Management Interlocks Act.
Printed on the following pages are the Federal Register
documents. The amendments to Regulation L are e ffe c tiv e May 9, 1980. The
revised pamphlet will be sent when it is available.-^
The slip sheet for Rules Regarding D elegation o f Authority is
enclosed. Member banks and others should file this slip sheet in their binders
and destroy the slip sheet dated November 1979.
Any questions concerning Regulation L should be directed to
William C. Reddick, Jr. o f our Bank Supervision and Regulations Department,
Ext. 6274.
Sincerely yours,
Robert H. Boykin
First Vice President
Enclosure
Banks and others are encouraged to use the following incoming W A T S numbers in contacting this Bank:
1-800-442-7140 (intrastate) and 1-800-527-9200 (interstate). For calls placed locally, please use 651 plus the
extension referred to above.
This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)
BB
FEDERAL RESERVE press release
For imnediate release
Apr i l 14,
1980
The Federal Reserve Board, together w i t h other agencies that
supervise federally insured financial institutions, today made public revised
final regulations to carry out the provisions of the Depository Institutions
Management Interlocks Act .— ^
The Board issued final rules —
Act in July, but said it would accept
Regulation L —
under the Interlocks
further comment on them.
The revisions
announced today reflect consideration of comment received.
In July the Board also proposed four amendments to the final rules.
The Board today made public the amendments in final form, after consideration
of comnent on them.
The Board made the following revisions of Regulation L :
Requests were received for relief from depository Institutions
loss of a large part of their directors or other management officials
application of the provisions of the Interlocks Act.
Accordingly,
of the intent of the Congress to avoid undue disruptions
facing
through
and in view
in the operations of
depository institutions, the Board has provided in Regulation L that organizations
experiencing the loss of half or more of their directors or of other management
personnel under provisions of the Act may have up to 30 months to come into
compliance wit h the Act, provided that:
1.
The depository institution submits a writ ten proposal for order
termination of the services of the affected management officials, and
—
Title II of the Financial Institutions Regulatory and Interest Rate
Control Act of 1978
-2 2.
The officials agree to sever their relationships w i t h the
institution not later than 30 months after the change in circumstances requiring
termination.
Most of the changes to the final rules were clarifications
to comment.
in response
These Include:
--Adoption of a 10-mile rule -- measured by road miles -- for
defining "adjacent."
--Defining the "office" of a depository holding company as
its principal corporate office.
The Board took the following actions on its July proposals
for
amendments to Regulation L:
1.
Grandfathering of interlocks
The Board adopted without substantive change its proposal stating
that those eligible for grandfathered interlocking relationships include those
whose service began before November 10, 1978 and was not then in violation of
the Clayton Antitrust Act.
Such grandfathered interlocks m ay continue, absent
a change in circumstances, until November 10, 1988. The Board wi thdrew a
proposal to apply certain restraints to the service of a management official
with a corporation that became a depository holding company after November 9,
1978 by acquiring shares of the depository institution.
2.
Representative or nominee
The July proposal would have made certain relationships of an official,
including family, employment or agency relationships, normally sufficient to
establish an express or implied duty of the official to act as a representative
or nominee.
In the final form of this amendment these are relationships that
"may" establish such obligations, but that will not of themselves create an
express or implied obligation.
The agencies added a provision specifying that
-3-
•
whether such obligations exist will be decided on a case-by-case basis after
the affected person or persons shall be given an opportunity to respond.
3.
_
"Persons"
In July the Board offered for comment three alternatives as possible
definitions of "persons."
The amendment as adopted after consideration of
comment received includes as "persons" corporations and other businesses as well
as natural persons.
But it excludes corporations and other businesses
the definition of representative or nominee.
considered persons
from
Thus, while corporations are
for the purposes of the provisions of the Interlocks Act they
will not, under Regulation L, be deemed to have representatives or nominees on
boards.
4.
Change in circumstances affecting grandfathered interlocks
The provisions of this proposal were retained generally.
Increased
management responsibility has been eliminated as a change in circumstances that
would defeat grandfathered rights.
A n extended grace period has been provided
for compliance by institutions experiencing changes in circumstance prior to the
effective date of the amendments.
A n extended grace period has also been
provided for compliance by institutions that must, as a result of a change in
circumstances, terminate non-grandfathered interlocks.
Separately, the Board issued an interpretation of its rules permitting
the Federal Reserve Banks, under delegated authority,
to permit a further extension
to avoid undue disruption of annual shareholders' meetings.
The final regulations of the five Federal financial institutions regulators,
incorporating revisions and amendments, together w i t h revised Regulation L
and the Board's interpretation, are attached.
The revised and amended rules, and the interpretation, are effective
M a y 9, 1980.
- 0 -
BOARD O F GOVERNORS O F THE FEDERAL RESERVE SYSTEM
RULES REGARDING DELEGATION OF AUTHORITY
AM ENDM ENTS t
As am ended effective May 9, 1980
1. Effective November 28, 1979. section
265.2(c) is amended by adding a new paragraph
(25) to read as follows:
SECTION 265.2— SPECIFIC FUNCTIONS
DELEGATED TO BO ARD EMPLOYEES
A N D TO FEDERAL RESERVE BANKS.
* * * * *
SECTION 265.2— SPECIFIC FUNCTIONS
DELEGATED TO B O A R D EMPLOYEES A N D TO
FEDERAL RESERVE BANKS.
* * * * *
(0 Each Federal Reserve Bank is authorized as
to a member bank or other indicated organization
for which the Reserve Bank is responsible for re
ceiving applications or registration statements; as to
(c) The D irector of the Division of Banking
its officers under subparagraph (23) of this para
Supervision and Regulation (or. in the Director's
graph; and as to its own facilities under subpara
absence, the Acting Director) is authorized:
graph (26) of this paragraph:
* * * * *
* * * * *
(25) Under the provisions of section 17(c)(3) of
(48). Under § 212.6 of this chapter (Regulation
the Securities Exchange Act of 1934, as amended,
L relating to changes in circumstances requiring ter
to make available upon request to the Securities and
mination of interlocking management official re
Exchange Commission reports of examination of
lationships). to grant time for compliance with
transfer agents, clearing agencies and municipal
§ 212 of up to an aggregate of 15 months from the
securities dealers for which the Board is the
date on which the change in circumstances as speci
appropriate regulatory agency for use by the Com
fied in that section occurs when the additional time
mission in the exercise of its supervisory responsi
appears to be appropriate to avoid undue disruption
bilities under that statute.
to the depository organizations involved in the man
agement interlocks.
2. Effective May 9. 1980. § 265.2 (f) is
amended by adding subparagraph (48) to read as
follows:
+ For this Regulation to be complete as amended May 9. 1980. retain:
1) Printed regulation pamphlet dated Septem ber 21, 1979.
2) This slip sheet. Destroy slip sheet dated Novem ber 1979.
APRIL 1980
BOARD O F G O V ER N O R S
o f the
FE D E R A L R E SE R V E SYSTEM
MANAGEMENT OFFICIAL INTERLOCKS
R E G U L A T IO N L
(12 CFR 212)
Adopted July 19, 1979
As amended effective May 9, 1980
A ny inquiry relatin g to this regulation should be addressed to the Federal
R eserve B ank o f the Fed eral Reserve D istrict in which the inq u iry arises.
CONTENTS
Page
S e c .2 1 2 . 1 — A u t h o r i t y , P u r p o s e , a n d S c o p e .....................................................................................................................
3
S e c . 2 1 2 . 2 — D e f i n i t i o n s .............................................................................................................................................................
3
S e c .2 1 2 . 3 — G e n e r a l P r o h i b i t i o n s ............................................................................................................................................
S e c .2 1 2 . 4 — P e r m i t t e d I n t e r l o c k i n g R e l a t i o n s h i p s ....................................................................................................
4
4
S e c . 2 1 2 .5 — G
e l a t i o n s h i p s ......................................................................................
6
C i r c u m s t a n c e s ................................................................................................................................
6
randfathered
S e c . 2 1 2 .6 — C h an ges
Sec .
212.7—
in
E ffe c t o f In te rlo c k s A c t on C la y to n
S e c . 2 1 2 .8 — E n f o r c e m
Statutory A
I n t e r l o c k in g R
p p e n d ix
A c t ...........................................................................................
7
e n t ................................................................................................................................................................
7
..............................................................................................................................................................................
8
2
REGULATION L
(12 CFR 212)
Adopted July 19, 1979
As amended effective May 9, 1980
MANAGEMENT OFFICIAL INTERLOCKS*
SECTION 212.1— AUTHORITY, PURPOSE.
AN D SCOPE
(a) Authority. This Part is issued under the pro
visions of the Depository Institution Management
Interlocks Act (“Interlocks Act”) (12 U.S.C. 3201
et seq.).
(b) Purpose and scope. The general purpose of
the Interlocks Act and this Part is to foster competi
tion by general prohibiting a management official
of a depository institution or depository holding
company from also serving as a management offi
cial of another depository institution or depository
holding company if the two organizations (1) are
not affiliated and (2) are very large or are located
in the same local area. This Part applies to manage
ment officials of State member banks, bank holding
companies, and their affiliates.
SECTION 212.2— DEFINITIONS
For the purpose of this Part, the following defini
tions apply:
(a) “Adjacent cities, towns, or villages” means
cities, towns or villages whose borders are within
ten road miles of each other at their closest points.
The property line of an office located in an unin
corporated city, town, or village is regarded as the
boundary line of that city, town or village for the
purpose of this definition.
(b) “Affiliate” has the meaning given in section
202 of the Interlocks Act. For purposes of section
202, an individual’s shares include shares of mem
bers of his or her immediate family. For the pur
pose of section 202(3)(B) of the Interlocks Act, an
affiliate relationship based on common ownership
does not exist ifthe appropriate Federal supervisory
* The text corresponds to the Code of Federal Regulations.
Title 12, Chapter II, Part 212; cited as 12 CFR 212. The words
“ this Part” as used herein, mean Regulation L.
agency or agencies determine, after giving the
affected persons the opportunity to respond, that the
asserted affiliation appears to have been established
in order to avoid the prohibitions of the Interlocks
Act and does not represent a true commonality of
interest between the depository organizations. In
making this determination, the agencies will consid
er, among other things, whether a person, including
members of his or her immediate family, whose
shares are necessary to constitute the group owns a
nominal percentage of the shares of one of the
organizations and the percentage is substantially
disproportionate with that person’s ownership of
shares in the other organization. “Immediate fami
ly” includes spouse, mother, father, child, grand
child, sister, brother, or any of their spouses,
whether or not any of their shares are held in trust.
(c) “Community” means city, town, or village,
or contiguous or adjacent cities, towns, or villages.
(d) “Contiguous cities, towns, or villages”
means cities, towns, or villages whose borders
actually touch each other.
(e) “ Depository holding company” means a
bank holding company or a savings and loan hold
ing company (as more fully defined in section 202
of the Interlocks Act) having its principal office lo
cated in the United States.
(f) “Depository institution” means a commercial
bank (including a private bank), a savings bank, a
trust company, a savings and loan association, a
building and loan association, a homestead associa
tion, a cooperative bank, an industrial bank, or a
credit union, chartered in the United States and
having a principal office located in the United
States. Additionally, a United States office, includ
ing a branch or agency, of a foreign commercial
bank is a “depository institution.”
(g) “Depository organization” means a deposi
tory institution or a depository holding company.
(h) “Management official” means an employee
REGULATION L
or officer with management functions (including a
branch manager), a director (including an advisory
director or honorary director), a trustee of a busi
ness organization under the control of trustees
(e.g., a mutual savings bank), or any person who
has a representative or nominee serving in any such
capacity. “Management official” does not mean a
person whose management functions relate exclu
sively to the business of retail merchandising or
manufacturing, for the purposes of section 212.3(c)
of this Part, and does not mean a person whose
management functions relate principally to the busi
ness outside the United States of a foreign commer
cial bank. “Management official” does not include
persons described in the provisos of section 202(4)
of the Interlocks Act.
(i) “Office” of a depository institution means a
principal office or a branch office located in the
United States, but does not include a representative
office of a foreign commercial bank, an electronic
terminal, or a loan production office. “Office” of a
depository holding company means its principal
corporate headquarters.
(j) “Person” means a natural person, corpora
tion, or other business.
(k) “Representative or nominee” means a per
son who serves as a management official and has
an express or implied obligation to act on behalf of
another person with respect to management respon
sibilities. Whether a person is a “representative or
nominee” depends upon the facts in individual
cases, and the appropriate Federal supervisory
agency or agencies will determine, after giving the
affected persons an opportunity to respond, whether
a person is a “representative or nominee.” Certain
relationships, including family, employment, or
agency relationships, or the ability and exercise of
ability by a shareholder of a depository organization
to elect a director may be evidence of such an ex
press or implied obligation by the management offi
cial to another person. For the purposes of this
definition, “person” shall include only natural per
sons.
(I) “Total assets” means assets measured on a
consolidated basis as of the close of the organiza
tion’s last fiscal year. The total assets of a deposi
tory holding company include the total assets of its
depository institution affiliates for the purposes of
section 212.3(b) of this Part, and include the total
assets of all of its affiliates for purposes of section
212.3(c) of this Part. Total assets of a United States
branch or agency of a foreign commercial bank
means total assets of such branch or agency itself
§ 212.3
exclusive of the assets of the other offices of the
foreign commercial bank.
(m) “United States” means any State of the Unit
ed States, the District of Columbia, any territory
of the United States, Puerto Rico, Guam, American
Samoa, or the Virgin Islands.
SECTION 212.3— GENERAL PROHIBITIONS
(a) Community. A management official of a de
pository organization may not serve at the same
time as a management official of another depository
organization not affiliated with it if: (1) offices of
both are located in the same community; (2) offices
of depository institution affiliates of both are lo
cated in the same community; or (3) an office of
one of the depository organizations is located in the
same community as an office of a depository insti
tution affiliate of the other.
(b) SMSA. A management official of a deposi
tory organization may not serve at the same time as
a management official of another depository organi
zation not affiliated with it if: (1) offices of both
are located in the same Standard Metropolitan Sta
tistical Area (“SMSA”) and either has total assets
of $20 million or more; (2) offices of depository
institution affiliates of both are located in the same
SMSA and either of the depository institution affili
ates has total assets of $20 million or more; or (3)
an office of one of the depository organizations is
located in the same SMSA as an office of a deposi
tory institution affiliate of the other and either the
depository organization or the depository institution
affiliate has total assets of $20 million or more.
(c) M ajor Assets. Without regard to location, a
management official of a depository organization
with total assets exceeding $1 billion or a manage
ment official of any affiliate of the greater than $1
billion depository organization may not serve at the
same time as a management official of a nonaffili
ated depository organization with total assets ex
ceeding $500 million or a management official of
any affiliate of the greater than $500 million de
pository organization.
SECTION 212.4— PERMITTED INTERLOCKING
RELATIONSHIPS
(a) In terlo ck in g relationships p erm itted by
statute. The prohibitions of section 212.3 do not
apply in the case of any one or more of the follow
ing organizations or their subsidiaries:
(1) a depository organization that does not do
§ 212.4
business within the United States except as an inci
dent to its activities outside the United States;
(2) a corporation operating under section 25 or
25(a) of the Federal Reserve Act (“Edge Corpora
tions” and “Agreement Corporations”);
(3) a depository organization that has been
placed formally in liquidation, or that is in the
hands of a receiver, conservator, or other official
exercising a similar function;
(4) a credit union being served by a manage
ment official of another credit union;
(5) a State-chartered savings and loan guaranty
corporation; or
(6) a Federal Home Loan Bank or any other
bank organized solely for the purpose of serving
depository insitutions (commonly referred to as
“bankers’banks”) or solely for the purpose of pro
viding securities clearing services and services re
lated thereto for depository institutions, securities
companies, or both.
(b) In terlo ck ing relatio n sh ip s perm itted by
Board order. A management official or a prospec
tive management official of a State member bank,
bank holding company, or affiliate of either may
apply for the Board’s prior approval to enter into a
relationship involving another depository organiza
tion that would otherwise be prohibited under sec
tion 212.3 of this Part, ifthe relationship falls with
in any of the classifications enumerated in this
paragraph. If the relationship involves a depository
organization subject to the supervision of another
Federal supervisory agency as specified in section
207 of the Interlocks Act, the management official
or prospective management official must also obtain
the prior approval of that other agency.
REGULATION L
by the appropriate Federal supervisory agency or
agencies in any specific case.
(2) Newly-chartered organization. A person
may serve at the same time as a management offi
cial of two or more depository organizations if one
of the depository organizations (or an affiliate
thereof) is a newly-chartered organization, subject
to the following conditions: (i) The appropriate
Federal supervisory agency or agencies determine
the relationship to be necessary to provide manage
ment or operating expertise to the newly-chartered
organization; (ii) no interlocking relationship per
mitted by this paragraph shall continue for more
than two years after the newly-chartered organiza
tion commences; and (iii) other conditions in addi
tion to or in lieu of the foregoing may be imposed
by the appropriate Federal supervisory agency or
agencies in any specific case.
(3) Conditions endangering safety o r sound
ness. A person may serve at the same time as a
management official of two or more depository
organizations (or affiliates thereof) if the primary
Federal supervisory agency of one of the depository
organizations believes that such depository organi
zation faces conditions endangering the organiza
tion’s safety or soundness, subject to the following
conditions: (i) The appropriate Federal supervisory
agency or agencies determine the relationship to be
necessary to provide management or operating ex
pertise to the organization facing conditions endan
gering safety or soundness; and (ii) other conditions
in addition to or in lieu of the foregoing may be
imposed by the appropriate Federal supervisory
agency or agencies in any specific case.
(4) Organization sponsoring credit union. A
(1)
O r g a n iz a tio n in low inco m e a r e a ; management official of a depository organization or
minority or women’s organization. A person may
its affiliate may serve at the same time as a man
serve at the same time as a management official of agement official of a Federally-insured credit union
two or more depository organizations (or affiliates that is sponsored by the depository organization or
thereof) if one of the depository organizations is its affiliate primarily to serve employees of the de
(A) located, or to be located, in a low income or pository organization.
other economically depressed area, or (B) control
(5) Loss of m anagem ent officials due to
led or managed by persons who are members of changes in circumstances. If a depository organi
minority groups or by women, subject to the fol zation experiences a change in circumstances de
lowing conditions: (i) The appropriate Federal su scribed in paragraphs (a)(1), (b)(1), or (b)(2) of
pervisory agency or agencies determine the relation section 212.6, and the change requires the termina
ship to be necessary to provide management or tion of service at the depository organization of 50
operating expertise to the organization specified in per cent or more of the organization’s directors or
(A) or (B) above; (ii) no interlocking relationship of 50 per cent or more of the total management
permitted by this paragraph shall continue for more
officials of the depository organization, such man
than five years; and (iii) other conditions in addi agement officials may continue to serve in excess
tion to or in lieu of the foregoing may be imposed
of the time periods provided in paragraphs (a)(2),
REGULATION L
(b)(1), and (b)(2) of section 212.6, provided that:
(i) The appropriate Federal supervisory agency or
agencies determines that the service by such man
agement officials is necessary to provide manage
ment or operating expertise; (ii) each management
official so affected agrees to sever the prohibited
interlocking relationship no later than 30 months af
ter the change in circumstances; (iii) the depository
organization submits a proposal for the orderly ter
mination of service by such management officials
over the time period provided; and (iv) other condi
tions in addition to or in lieu of the foregoing may
be imposed by the appropriate Federal supervisory
agency or agencies in any specific case.
SECTION 212.5— GRANDFATHERED
INTERLOCKING RELATIONSHIPS
A person whose interlocking service in a position
as a management official of two or more depository
organizations began prior to November 10, 1978,
and was not immediately prior to that date in viola
tion of section 8 of the Clayton Act (15 U.S.C. §
19) is not prohibited from continuing to serve in
such interlocking positions until November 10,
1988, except as provided in section 212.6(a) of this
Part.
SECTION 212.6— CHANGES IN
CIRCUMSTANCES
(a)(1) G randfathered interlocks. If a person’s
service as a management official is grandfathered
under section 212.5 of this Part, the person must
terminate such service if the service becomes
prohibited by the occurrence of any of the follow
ing changes in circumstances:
(i) Acquisitions, m ergers, and consolida
tions. One of the depository organizations involved
in the interlocking relationship acquires or is ac
quired by, is merged into or with, or is consoli
dated with another depository organization for
which prior to the transaction the person could not
have served as a management official under section
212.3; or
(ii) Branching. One of the depository orga
nizations involved in the grandfathered interlocking
relationship, or its depository institution affiliate,
establishes an initial office in the same community
as the other depository organization, or its deposi
tory institution affiliate, or both of the depository
organizations, or their depository institution affili
§ 212.5
ates, establish offices in a community or SMSA
where neither previously had an office.
(2)
G race period. If a person’s grandfathered
service becomes prohibited under paragraph (a)(1)
of this section, the person may continue to serve as
a management official of all organizations involved
in the prohibited interlocking relationship through
the date of the next regularly scheduled annual
shareholders’ meeting of any of the organizations
involved, whichever occurs last, unless the approp
riate Federal supervisory agency or agencies take
affirmative action in an individual case to establish
a shorter period. However, the person may request
the appropriate agency or agencies to grant an addi
tional extension of time to continue the interlocking
relationship, but the prohibited interlocking re
lationship may not continue for more than 15
months from the date of the change in circum
stances. If the change in circumstances occurred
prior to (May 9, 1980), the change will be consid
ered to have occurred on (May 9, 1980) for pur
poses of this paragraph.
(b)(1) N on-grandfathered interlocks; involun
tary changes; grace period. If a person's service
as a management official is not grandfathered under
section 212.5 and becomes prohibited as a result of
an increase in the asset size of an organization due
to natural growth, or as a result of a change in
SMSA or community boundaries or the designation
of a new SMSA, the person has 15 months from
the date of the change in circumstances to comply
with this Part, unless the appropriate Federal super
visory agency or agencies take affirmative action in
an individual case to establish a shorter period. If
the change in circumstances occurred priorto May 9,
1980 the change will be considered to have
occurred on May 9, 1980 for purposes of this sub
paragraph.
(2)
N on-grandfathered interlocks; voluntary
changes; grace period. If a person’s service as a
management official is not grandfathered under sec
tion 212.5 of this Part and becomes prohibited as a
result of an acquisition, merger, consolidation, or
the establishment of an office, the person may con
tinue to serve as a management official of all orga
nizations involved in the prohibited interlock
through the date of the next regularly scheduled
annual shareholders’ meeting of any of the organi
zations involved, whichever occurs last, unless the
appropriate Federal supervisory agency or agencies
take affirmative action in an individual case to
establish a shorter period. However, the person
may request the appropriate agency or agencies to
§ 212.7
grant an additional extension of time to continue
the interlocking relationship, but the prohibited in
terlocking relationship may not continue for more
than 15 months from the date of the change in
circumstances. If the change in circumstances
occurred prior to May 9, 1980, the change will be
considered to have occurred on May 9, 1980 for
purposes of this paragraph.
SECTION 212.7— EFFECT OF INTERLOCKS
ACT O N CLAYTON ACT
The Board of Governors of the Federal Reserve
System regards the provisions of the first three
paragraphs of section 8 of the Clayton Act (15
U.S.C. 19) to have been supplanted by the revised
and more comprehensive prohibitions on manage
ment official interlocks between depository organi
zations in the Interlocks Act.
REGULATION L
SECTION 212.8— ENFORCEMENT
The Board of Governors of the Federal Reserve
System administers and enforces the Interlocks Act
with respect to State member banks, bank holding
companies, and their affiliates, and may refer the
case of a prohibited interlocking relationship in
volving any such organization, regardless of the na
ture of any other organization involved in the
prohibited relationship, to the Attorney General of
the United States to enforce compliance with the
Interlocks Act and this Part. If an affiliate of a
State member bank or bank holding company is pri
marily subject to the regulation of another Federal
supervisory agency, then the Board does not admin
ister and enforce the Interlocks Act with respect to
that affiliate.
REGULATION L
S T A T U T O R Y APPENDIX
INTERLOCKING DIRECTORS
Title II of the Act of November 10, 1978
(92 Stat. 3672)
201.
This title may be cited as the “Depository Insti
tution Management Interlocks Act”.
Sec.
202.
As used in this title—
(1) the term “depository institution” means a
commercial bank, a savings bank, a trust company,
a savings and loan association, a building and loan
association, a homestead association, a cooperative
bank, an industrial bank, or a credit union;
(2) the term “depository holding company”
means a bank holding company as defined in sec
tion 2(a) of the Bank Holding Company Act of
1956, a company which would be a bank holding
company as defined in section 2(a) of the Bank
Holding Company Act of 1956 but for the exemp
tion contained in section 2(a)(5)(F) thereof, or a
savings and loan holding company as defined in
section 408(a)(1)(D) of the National Housing Act;
(3) the characterization of any corporation (in
cluding depository institutions and depository hold
ing companies), as an “affiliate of,” or as “affili
ated” with any other corporation means that—
(A) one of the corporations isa depository hold
ing company and the other is a subsidiary thereof,
or both corporations are subsidiaries of the same
depository holding company, as the term “subsidi
ary” is defined in either section 2(d) of the Bank
Holding Company Act of 1956 in the case of a
bank holding company or section 408(a)(1)(H) of
the National Housing Act in the case of a savings
and loan holding company; or
(B) more than 50 per centum of the voting
stock of one corporation is beneficially owned in
the aggregate by one or more persons who also be
neficially own in the aggregate more than 50 per
centum of the voting stock of the other corporation;
Sec.
(C) one of the corporations is a trust company
all of the stock of which, except for directors qual
ifying shares, was owned by one or more mutual
savings bank on the date ofenactment ofthisAct, and
the other corporation is a mutual savings bank; or
(D) one of the corporations is a bank, insured
STATUTORY APPENDIX
by the Federal Deposit Insurance Corporation and
chartered under State law, the voting securities of
which are held by other banks, as permitted by
State law, and which bank is primarily engaged in
providing banking services for other banks and not
the public: Provided, however. That in no case
shall the voting securities of such corporation be
held by any such other bank in excess of 5 per
centum of the paid-in capital and 5 per centum of
the surplus of such other bank; or
(E)
one of the corporations is a bank, char
tered under State law and insured by the Federal
Deposit Insurance Corporation, the voting securities
of which are held only by persons who are officers
of other banks, as permitted by State law, and
which bank is primarily engaged in providing bank
ing services for other banks and not the public:
Provided, however. That in no case shall the voting
securities of such corporation be held by such offic
ers of the other banks in excess of 6 per centum of
the paid-in capital and 6 per centum of the surplus
of such a bank.
(4) the term “management official” means an
employee or officer with management functions, a
director (including an advisory or honorary direc
tor). a trustee of a business organization under the
control of trustees, or any person who has a rep
resentative or nominee serving in any such capac
ity: Provided, That if a corporator, trustee, director,
or other officer of a State-chartered savings bank or
cooperative bank is specifically authorized under
the laws of the State in which said institution is
located to serve as a trustee, director, or other
officer of a State-chartered trust company which
does not make real estate mortgage loans and does
not accept savings deposits from natural persons,
then, for the purposes of this title, such corporator,
trustee, director, or other officer shall not be
deemed to be a management official of such trust
company: And provided further. That if a manage
ment official of a State-chartered trust company
which does not make real estate mortgage loans and
does not accept savings deposits from natural per
sons is specifically authorized under the laws of the
State in which said institution is located to serve as
a corporator, trustee, director, or other officer of a
State-chartered savings bank or cooperative bank,
then, for the purposes of this title, such manage
ment official shall not be deemed to be a manage
ment official of any such savings bank or
cooperative bank; and
(5) the term “office” used with reference to a
REGULATION L
STATUTORY APPENDIX
depository institution means either a principal office
or a branch.
[U. S. C ., title 12, sec. 3201.)
Sec . 203.
A management official of a depository institution
or a depository holding company may not serve as
a management official of any other depository insti
tution or depository holding company not affiliated
therewith if an office of one of the institutions or
any depository institution that is an affiliate of such
institutions is located within either—
(1) the same standard metropolitan statistical
area as defined by the Office of Management and
Budget, except in the case of depository institutions
with less than $20,000,000 in assets in which case
the provision of paragraph (2) shall apply, as that
in which an office of the other institution or any
depository institution that is an affiliate of such
other institution is located, or
(2) the same city, town, or village as that in
which an office of the other institution or any de
pository institution that is an affiliate of such other
institution is located, or in any city, town, or vil
lage contiguous or adjacent thereto.
[U. S. C .. title 12, sec. 3202.)
Se c . 204.
If a depository institution or a depository hold
ing company has total assets exceeding
$1,000,000,000, a management official of such in
stitution or any affiliate thereof may not serve as a
management official of any other nonaffiliated de
pository institution or depository holding company
having total assets exceeding $500,000,000 or as a
management official of any affiliate of such other
institution.
[U. S. C ., title 12, sec. 3203.]
Sec . 205.
The prohibitions contained in sections 203 and
204 shall not apply in the case of any one or more
of the following or subsidiary thereof:
(1) A depository institution or depository holding
company which has been placed formally in li
quidation, or which is in the hands of a receiver,
conservator, or other official exercising a similar
function.
(2) A corporation operating under section 25 or
25A of the Federal Reserve Act.
(3) A credit union being served by a manage
ment official of another credit union.
(4) A depository institution or depository holding
company which does not do business within any
State of the United States, the District of Columbia,
any territory of the United States, Puerto Rico,
Guam, American Samoa, or the Virgin Islands ex
cept as an incident to its activities outside the
United States.
(5) A State-chartered savings and loan guaranty
corporation.
(6) A Federal Home Loan Bank or any other
bank organized specifically to serve depository in
stitutions.
[U. S. C ., title 12, sec. 3204.)
206.
A person whose service in a position as a man
agement official began prior to the date of enact
ment of this title and was not immediately prior to
the date of enactment of this title in violation of
section 8 of the Clayton Act is not prohibited by
section 203 or section 204 of this title from con
tinuing to serve in that position for a period of ten
years after the date of enactment of this title. The
appropriate Federal banking agency (as set forth in
section 209) may provide a reasonable period of
time for compliance with this title, not exceeding
fifteen months, after any change in circumstances
which makes such service prohibited by this title.
Sec.
[U. S. C ., title 12, sec. 3205.]
207.
This title shall be administered and enforced by—
(1) the Comptroller of the Currency with respect
to national banks and banks located in the District
of Columbia,
(2) the Board of Governors of the Federal Re
serve System with respect to State banks which are
members of the Federal Reserve System, and bank
holding companies,
(3) the Board of Directors of the Federal Deposit
Insurance Corporation with respect to State banks
which are not members of the Federal Reserve Sys
tem but the deposits of which are insured by the
Federal Deposit Insurance Corporation,
(4) the Federal Home Loan Bank Board with re
spect to institutions the accounts of which are in
sured by the Federal Savings and Loan Insurance
Sec.
STATUTORY APPENDIX
REGULATION L
------------------Corporation, and savings and loan holding com
panies.
(5) the National Credit Union Administration
with respect to credit unions the accounts of which
are insured by the National Credit Union Admin
istration, and
(6) Upon referral by the agencies named in the
foregoing paragraphs (1) through (5), the Attorney
General shall have the authority to enforce com
pliance by any person with this title.
[U. S. C ., title 12, sec. 3206 ]
*
*
*
*
*
209.
Rules and regulations to carry out this title, in
cluding rules or regulations which permit service by
a management official which would otherwise be
prohibited by section 203 or section 204, may be
prescribed by—
(1) the Comptroller of the Currency with respect
Sec.
10
to national banks and banks located in the District
of Columbia.
(2) the Board of Governors of the Federal Re
serve System with respect to State banks which are
members of the Federal Reserve System, and bank
holding companies.
(3) the Board of Directors of the Federal Deposit
Insurance Corporation with respect to State banks
which are not members of the Federal Reserve Sys
tem but the deposits of which are insured by the
Federal Deposit Insurance Corporation,
(4) the Federal Home Loan Bank Board with re
spect to institutions the accounts of which are in
sured by the Federal Savings and Loan Insurance
Corporation, and savings and loan holding com
panies, and
(5) the National Credit Union Administration
with respect to credit unions the accounts of which
are insured by the National Credit Union Admin
istration.
[U. S. C ., title 12, sec. 3207 ]
•
24384
Federal Register / Vol. 45, No. 70 / Wednesday, April 9,1980 / Rules and Regulations
FEDERAL RESERVE SYSTEM
12 CFR Part 212
DEPARTMENT OF THE TREASURY
Comptroller of the Currency
12 CFR Part 26
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 348
FEDERAL HOME LOAN BANK BOARD
12 CFR Part 563f
NATIONAL CREDIT UNION
ADMINISTRATION
12 CFR Part 711
[Docket No. R-0198]
Management Official Interlocks; Final
Amendments to Existing Regulations
Board of Governors of the
Federal Reserve System, Comptroller of
the Currency, Federal Deposit Insurance
Corporation, Federal Home Loan Bank
Board, and National Credit Union
Administration.
a c t io n : Final amendments to existing
regulations.
a g en c ies :
On July 19,1979, the agencies
published regulations, as well as
proposed amendments to those
regulations, under the Depository
Institution Management Interlocks Act
(Title IIof the Financial Institutions
Regulatory and Interest Rate Control
Act of 1978) (the “Interlocks Act"). The
Interlocks Act prohibits certain
management official interlocks between
depository institutions, depository
holding companies, and their affiliates.
The final amended regulations
published in fullbelow include certain
clarifying and technical changes in the
regulations published in July, and add a
definition of the term “representative or
nominee," as well as provisions
concerning “grandfather" rights and
“changes in circumstances.” In addition,
the final amendments add a provision
that extends the compliance period for
depository organizations experiencing a
disruptive loss of management as a
result of a change in circumstances.
These amendments are considered to be
significant within the meaning of
Executive Order 12044 (“Improving
Government Regulations”),i.e.,they will
be of substantial interest to the financial
institutions community and the public
sum m ary:
because they include provisions that are
determinative of whether or not certain
interlocking relationships are prohibited.
EFFECTIVE DATE: May 9,1980.
FOR FURTHER INFORMATION CONTACT:
B ro n w e n M a s o n (202) 452-3564 o r
M e lan ie F e in (202) 452-3594, B o a rd o f
G o v e rn o rs o f th e F e d e ra l R e se rv e
S ystem ; G w e n n H ib b s (202) 447-1880 o r
H o w a rd F in k e lste in (202) 447-1880,
O ffice o f th e C o m p tro ller o f th e
C u rren cy ; P a m e la L eC ren (202) 389-4433,
F e d e ra l D e p o sit In s u ra n c e C o rp o ratio n ;
K a th le e n T o p eliu s (202) 377-6444 or
K e n n e th H a ll (202) 377-6443, F e d e ra l
H o m e L o an B an k B oard; R o ss K en d all
(202) 357-1030, N a tio n a l C re d it U n io n
A d m in istra tio n ..
SUPPLEMENTARY INFORMATION: T h e
Depository InstitutionManagement
Interlocks Act was enacted on
November 10,1978, as Title IIof the
Financial Institutions Regulatory and
Interest Rate Control Act of 1978 (12
U.S.C. 3201 etseq.).On July 19,1979, the
agencies published regulations
implementing the Interlocks Act (44 FR
42152), effective immediately upon
publication. At the same time, the
agencies issued proposed amendments
to complete the regulations (44 FR 42212)
by clarifyingcertain issues not
addressed in the regulations. In
addition, comment was sought on
whether or not the agencies should
define "person” so as to exclude
corporations or other business entities
from being considered “management
officials" for the purposes of the
Interlocks Act. Public comment was
invited for sixty days, until September
17,1979, regarding both the regulations
and the proposed amendments.
The agencies received approximately
15 comments concerning the regulations
and approximately 65 comments
concerning the proposed amendments.
Upon careful review of the comments,
as well as experience gained in
administering the Interlocks Act
regulations, the agencies have decided
to make certain technical and clarifying
changes in the July regulations and to
adopt the proposed amendments with
certain modifications.
The final amended regulations are
designed to further the purpose of the
Interlocks Act to foster competition
among depository institutions. Because
the Interlocks Act requires that
exceptions from the Act’s prohibitions
be created by regulations, itis necessary
for the agencies to issue these formal
regulations. However, consistent with
Executive Order 12044 (“Improving
Government Regulations," 43 FR 12661),
the agencies have determined that no
increased costs from recordkeeping or
reporting will result from compliance
with the regulations, and accordingly, no
cost-benefit analysis of the regulations
is necessary.
In accordance with section 553(d) of
the Administrative Procedure Act (5
U.S.C. 500, etseq.}, the final
amendments to the regulations
implementing the Interlocks Act will be
effective May 9,1980. An explanation of
each of the changes to the regulations
made by the final amendments and a
discussion of the comments received are
set forth below.
1.Definition of “adjacent.”The
regulations issued in July defined
"adjacent” to mean cities, towns, or
villages that are within ten miles of one
another at their closest points. However,
the agencies specifically solicited
comment on whether a distinction
should be made between adjacent areas
in rural and urban locations. For
example, consideration was given to
treating as adjacent, cities, towns, or
villages within ten miles of each other
and located in an SMSA, and to treating
as adjacent, cities, towns, or villages
located within 25 miles of each other but
not within an SMSA. The agencies
received few comments on this proposal
and therefore believe that a distinction
between commuting and travel patterns
in rural and urban areas isnot
warranted. Thus, the definition of
adjacent has not been substantively
amended at this time.
The final amendments do, however,
clarify the definition of adjacent by
specifying that the distance between
cities, towns, or villages ismeasured by
road miles. Thus, cities located on
opposite banks of a river will not be
considered adjacent ifthe distance
between them via the nearest bridge is
more than 10 miles.
2.Definition of “affiliate."The
definition of “affiliate” has been
clarified in two respects. Language has
been added to the regulations to
emphasize that, for the purposes of
section 202(3)(B) of the Interlocks Act,
the shares owned by a given individual
include any shares that are owned by
members of the individual's immediate
family. In addition, the definition of
"immediate family” has been amended
to include specifically the spouse of an
individual.
3. Definition of "depository
institution’’— application ofInterlocks
Act toforeign banks. The regulations
are intended to subject only
Federal Register / Vol. 45, No. 70 / Wednesday, April 9, 1980 / Rules and Regulations
m a n a g e m e n t o fficials se rv in g U n ite d
S ta te s o ffices o f fo reig n b a n k s to th e
p ro v isio n s o f th e In te rlo c k s A c t a n d n o t
to p ro h ib it c e rta in in terlo ck in g
re la tio n sh ip s o u ts id e th e U n ite d S ta te s
b e tw e e n tw o fo reig n b a n k s h a v in g
su b sid ia ry b a n k s , b ra n c h e s o r ag e n c ie s
lo c a te d in th e U n ite d S ta te s. T h e
re g u la tio n s is s u e d in July m a y n o t h a v e
a c c u ra te ly re fle c te d th e a g e n c ie s'
d e te rm in a tio n in th is re sp e c t.
A cco rd ing ly , th e a g e n c ie s h a v e
a m e n d e d th e d e fin itio n o f “d e p o sito ry
in s titu tio n ” to m a k e c le a r th a t o n ly
in s titu tio n s c h a rte re d in th e U n ite d
S ta te s a n d h a v in g a p rin c ip a l office
lo c a te d in th e U n ite d S ta te s, a s w e ll a s
U n ite d S ta te s o ffices o f foreign
co m m ercial b a n k s, a re d e p o sito ry
in s titu tio n s fo r th e p u rp o s e s o f th e
In terlo c k s A ct.
4. Definition of “office."T h e July
reg u latio n s d id n o t m a k e a n y d is tin c tio n
in th e d efin itio n o f "o ffice” b e tw e e n th a t
o f a d e p o sito ry in s titu tio n a n d th a t o f a
d e p o sito ry h o ld in g co m p an y . T h u s, in
so m e c a se s, a n office o f a d e p o sito ry
hold in g co m p a n y couM b e in te rp re te d to
in clu d e a lo c a tio n a t w h ic h th e
d e p o sito ry h o ld in g c o m p a n y c o n d u c ts
its o p e ra tio n s, su ch a s a p la n t o r sto rag e
facility. T h e a g e n c ie s d o n o t b e lie v e th a t
th e p ro v isio n s o f se c tio n 203 o f th e
In te rlo ck s A c t w e re in te n d e d to a p p ly to
lo c a tio n s o f a d e p o sito ry h oldin g
co m p a n y n o t in v o lv ed in th e c o n d u c t of
d e p o sito ry b u sin e ss, a n d th e y d id n o t
in te n d th e re g u la tio n s to h a v e th a t
re su lt. A cco rd in g ly , th e a g e n c ie s h a v e
a d d e d a te c h n ic a l a m e n d m e n t to clarify
th e sc o p e o f th e d e fin itio n o f "o ffice”
w ith re s p e c t to a d e p o sito ry h o ld in g
co m p an y . T h e re g u la tio n h a s b e e n
a m e n d e d to d e fin e th e office o f a
d e p o sito ry h o ld in g c o m p a n y (th a t is n o t
a lso a d e p o sito ry in stitu tio n ) a s its
p rin c ip a l c o rp o ra te h e a d q u a rte rs .
5. Definition of ‘‘
management
official”— exclusion ofcertainpersons.
A m a n a g e r o f a d e p o sito ry h o ld in g
co m p a n y ’s re ta il o r m a n u fa c tu rin g
su b sid ia ry m ig h t b e p re c lu d e d b y
se c tio n 204 o f th e In te rlo c k s A c t from
se rv in g a s a m a n a g e m e n t o fficial o f a n y
d e p o sito ry o rg a n iz a tio n w ith a s s e ts in
e x c e ss o f $500 m illion, if th e
c o n s o lid a te d a s s e ts o f th e d e p o sito ry
h o ld in g c o m p a n y e x c e e d $1 billion.
B ec a u se th e a g e n c ie s do n o t b e lie v e th a t
C o n g ress in te n d e d to p ro h ib it
m a n a g e m e n t se rv ic e b y in d iv id u a ls
w h o s e fu n ctio n s re la te e x c lu siv e ly to
re ta il m e rc h a n d isin g o r m a n u fac tu rin g ,
th e July re g u la tio n s e x c lu d e d su c h
p e rs o n s from th e d efin itio n of
“m a n a g e m e n t o fficial.” T h e p re a m b le to
th e July re g u la tio n s re q u e s te d co m m e n t
co n ce rn in g w h e th e r o th e r c a te g o rie s o f
p e rs o n s w h o s e fu n c tio n s re la te
e x clu siv ely to n o n fin a n c ia l b u s in e s s
a c tiv itie s sh o u ld a lso b e e x c lu d e d from
th e d efin itio n . W h ile se v e ra l
c o m m en te rs su g g e ste d th a t th e a g e n c ie s
sh o u ld b ro a d e n th e c la ss o f p e rs o n s
e x c lu d e d from th e d efin itio n o f
“m a n a g e m e n t o fficial," n o sp ecific
situ a tio n s d e m o n stra tin g the n e e d for
a d d itio n a l c a te g o rie s w e re cited . In th e
a b s e n c e o f a n y e v id e n c e o f sp ecific
situ a tio n s th a t w o u ld w a r r a n t fu rth e r
e x clu sio n s, th e a g e n c ie s h a v e d e c id e d to
re ta in th e d e fin itio n a s o rig in ally
p ro m u lg ate d . T h e a g en c ies h a v e m a d e a
te c h n ic a l a m e n d m e n t to th e p h ra s in g o f
th e e x c lu sio n a ry se n te n c e to clarify th a t
th e e x c lu sio n a p p lie s o n ly to d e p o sito ry
o rg a n iz a tio n s s u b je c t to th e p ro h ib itio n s
o f se c tio n 204 o f th e In terlo c k s A ct.
6. Definition of "person.” S e c tio n
202(4) o f th e In te rlo c k s A c t d e fin e s th e
te rm “m a n a g e m e n t official" to in c lu d e
“a n y p e rs o n ” w h o h a s a re p r e s e n ta tiv e
o r n o m in ee se rv in g a s a n em p lo y ee o r
o fficer w ith m a n a g e m e n t fu n c tio n s o r
serv in g a s a d ire c to r. T h e te rm " a n y
p e rs o n ” c o u ld b e in te rp re te d to in c lu d e
co rp o ra tio n s a n d o th e r b u s in e sse s , a n d
a s a re su lt, a n o n d e p o sito ry c o rp o ra tio n
th a t h a s o n e o ffice r serv in g a s a d ire c to r
o f o n e d e p o s ito ry o rg a n iz a tio n a n d
a n o th e r o ffic er se rv in g a s a d ire c to r o f
a n o th e r d e p o s ito ry o rg a n iz a tio n co u ld
b e re g a rd e d a s a m a n a g e m e n t o fficial
(th ro ug h its " r e p re s e n ta tiv e s ” o r
“n o m in e e s”) s u b je c t to th e In te rlo c k s
A c t p ro h ib itio n s. T h e a g e n cie s
re q u e s te d c o m m e n t c o n c e rn in g w h e th e r
to d efin e th e te rm " p e rs o n ” fo r p u rp o s e s
o f th e In te rlo c k s A c t so a s to e x c lu d e
c o rp o ra tio n s o r o th e r b u sin e sse s .
S p ecifically , th e a g e n c ie s p ro p o s e d th re e
a lte rn a tiv e a p p ro a c h e s re g a rd in g th is
issu e:
1. D efine th e te rm “a n y p e rs o n ” to
m e a n o n ly n a tu r a l p e rso n s;
2. D efin e th e te rm to m e a n
c o rp o ra tio n s, o th e r b u sin e sse s , a n d
n a tu ra l p e rs o n s; o r
3. D efine th e te rm to m e a n
c o rp o ra tio n s, o th e r b u sin e sse s , a n d
n a tu r a l p e rs o n s, a n d in th e c a s e of
c o rp o ra tio n s o r o th e r b u s in e s s e s to lim it
th e a p p lic a b ility to th o se c irc u m s ta n c e s
in w h ic h a n in d iv id u a l a c ts in a
d e m o n s tra b ly re p re s e n ta tiv e m a n n e r o n
b e h a lf o f th e c o rp o ra te o r b u sin e ss
p rin cip a l.
T h e a g e n c ie s re c e iv e d a p p ro x im a te ly
16 c o m m e n ts co n c e rn in g th is issu e . A
m a jo rity o f th e c o m m e n ts fa v o re d
a lte rn a tiv e 1, w ith a sig n ific an t n u m b e r
a ls o e n d o rs in g a lte rn a tiv e 3 a s a s e c o n d
choice, w h ile o n e co m m e n t fa v o re d
a lte rn a tiv e 2. A n u m b e r o f co m m en te rs
a s s e rte d th a t th e in c lu sio n of
co rp o ra tio n s in th e d efin itio n o f
“p e rs o n ” w o u ld b e a n tic o m p e titiv e sin c e
24385
d e p o s ito ry o rg a n iz a tio n s o fte n c o m p e te
fo r a n o n d e p o sito ry c o m p a n y 's b u s in e s s
b y in v itin g c o m p a n y o fficials to se rv e o n
th e d e p o sito ry o rg a n iz a tio n 's b o a r d o f
d ire c to rs. T h e c o m m e n te rs a lso a s s e r te d
th a t th e in c lu sio n o f c o rp o ra tio n s in th e
d e fin itio n o f “p e rs o n ” w o u ld d e p riv e
m a n y d e p o sito ry o rg a n iz a tio n s of
in d iv id u a ls p o sse ssin g v a lu a b le
b u s in e s s e x p e rie n c e a n d ta le n t.
A fte r c a re fu l e v a lu a tio n o f a ll th e
c o m m e n ts a n d r e v ie w o f th e le g isla tiv e
h is to ry a n d re le v a n t le g al p rin c ip le s, th e
a g e n c ie s h a v e a d o p te d a m o d ified
v e rs io n o f a lte rn a tiv e 3. T h e re g u la tio n s
d e fin e th e te rm " p e r s o n ” to in c lu d e
c o rp o ra tio n s, o th e r b u s in e s s e s , a n d
n a tu r a l p e rs o n s, b u t lim it th e a p p lic a tio n
o f th e p ro v isio n b y ex c e p tin g
c o rp o ra tio n s a n d o th e r b u s in e s s e s from
th e d e fin itio n o f “re p r e s e n ta tiv e or
n o m in e e ." T h e a g e n c ie s b e lie v e th a t
in c lu sio n o f c o rp o ra tio n s a n d o th e r
b u s in e s s e s in th e te rm " p e rso n " is
re q u ire d b y th e la n g u ag e o f th e
In te rlo c k s A ct, th e a b s e n c e o f a n y
e v id e n c e o f le g isla tiv e in te n t to n a rro w
th e te rm , a n d b y th e s ta tu to ry p u rp o s e to
fo s te r c o m p e titio n in th e b a n k in g
in d u s try . In d e e d , th e a g e n c ie s a re o f th e
v ie w th a t situ a tio n s m a y a ris e in w h ic h
th e in d ire c t in te rlo c k c r e a te d w h e n
r e p r e s e n ta tiv e s o f a th ird firm se rv e a s
m a n a g e m e n t officials o f tw o o r m o re
d e p o s ito ry in s titu tio n s c o u ld in h ib it
c o m p e titio n am o n g th o s e d e p o sito ry
in s titu tio n s. T h u s, a n in te rp r e ta tio n o f
th e s ta tu te th a t in e ffec t d e n ie d th e
a g e n c ie s re g u la to ry a u th o rity to d e a l
w ith su c h a n tic o m p e titiv e re la tio n sh ip s
w o u ld u n n e c e s s a rily fru s tra te th e
p u rp o s e o f th e In te rlo c k s A ct.
A c co rd in g ly , th e a g e n c ie s h a v e a d o p te d
th e s e c o n d p ro p o s e d d e fin itio n o f th e
te rm “p e rs o n ” a s a m a tte r o f s ta tu to ry
co n stru c tio n .
T h e a g e n c ie s n e v e rth e le s s re co g n ize
th a t n o t a ll situ a tio n s in v o lv in g in d ire c t
in te rlo c k s am o n g d e p o s ito ry in s titu tio n s
w o u ld in h ib it c o m p e titio n am ong
d e p o sito ry o rg a n iz a tio n s. T h e ag e n c ie s
c u rre n tly la c k su ffic ie n t e m p iric a l d a ta ,
h o w e v e r, to id e n tify w ith sp ec ificity
th o s e s itu a tio n s in v o lv in g in d ire c t
in te rlo c k s th a t w o u ld n o t in h ib it
c o m p e titio n , o r to a s s e s s a c c u ra te ly th e
e ffe c t o n co m p e titio n in th e b a n k in g
in d u s try o f b a n n in g in d ire c t in te rlo c k s.
A cc o rd in g ly , th e a g e n c ie s h a v e p ro v id e d
a n e x c e p tio n fro m th e p ro h ib itio n s o f
th e A c t fo r n o n d e p o sito ry c o rp o ra tio n s
in v o lv e d in in d ire c t in te rlo c k s b y
d e fin in g th e te rm “r e p r e s e n ta tiv e o r
n o m in e e ” to in c lu d e o n ly
re p r e s e n ta tiv e s o r n o m in e e s o f n a tu ra l
p e rs o n s. A s a re su lt, c o rp o ra tio n s w ill
n o t b e r e g a r d e d a s "m a n a g e m e n t
o ffic ia ls.” H o w e v e r, th e a g e n c ie s
24386
Federal Register / Vol. 45, No. 70 / Wednesday, April 9, 1980 / Rules and Regulations
re s e rv e th e ir a u th o rity p u rs u a n t to § 209
o f th e A c t to p ro h ib it so m e o r all o f su c h
in d ire c t in te rlo c k in g re la tio n s h ip s in th e
fu tu re sh o u ld in fo rm a tio n b e co m e
a v a ila b le in d ic a tin g th a t su c h a c tio n is
ju stified .
7. Definition of "representative or
nominee"—individuals. S e c tio n 202(4) o f
th e In te rlo ck s A c t d e fin e s "m a n a g e m e n t
o fficial” to in c lu d e a p e rs o n w h o h a s a
re p re s e n ta tiv e o r n o m in e e se rv in g in th e
c a p a c ity o f a d ire cto r, a n o fficer w ith
m a n a g e m e n t fu n c tio n s, o r a n em p lo y e e
w ith m a n a g e m e n t fu n ctio n s. T h u s, a
p e rs o n m a y b e re g a rd e d a s a
m a n a g e m e n t o fficial o f a d e p o sito ry
o rg a n iz a tio n w ith o u t a c tu a lly serv in g a s
a m a n a g e m e n t official. T h e p ro p o s e d
d efin itio n o f th e te rm “re p re s e n ta tiv e o r
n o m in e e ” is su e d in July s ta te d th a t a
p e rs o n w o u ld b e c o n sid e re d to b e th e
re p r e s e n ta tiv e o r n o m in e e o f a n o th e r if
th e p e rs o n h a d a n e x p re s s o r im p lied
d u ty to a c t o n b e h a lf o f th e o th e r p e rs o n
w ith re s p e c t to m a n a g e m e n t
re sp o n sib ilitie s. C e rta in re la tio n sh ip s,
in c lu d in g fam ily, em p lo y m e n t, a n d
ag en cy , w e re s a id “n o rm a lly ” to b e
"‘su fficien t” to e s ta b lis h th e e x iste n c e o f
a n e x p re s s o r im p lied du ty .
T h e c o m m en ts re c e iv e d w e re even ly
d iv id e d am on g th o s e th a t s u p p o rte d the
p ro p o s e d d efin itio n a n d th o se th a t d id
n o t. M a n y c o m m e n te rs w h o o p p o se d th e
p ro p o s a l in te rp re te d it a s c re a tin g a n
a b s o lu te p re su m p tio n o f re p re s e n ta tiv e
o r n o m in ee s ta tu s b a s e d o n th e liste d
re la tio n sh ip s. B ec a u se th e a g e n c ie s d id
n o t in te n d to c re a te a n a b so lu te
p re su m p tio n , th e d e fin itio n h a s b e e n
re w ritte n to c la rify th e ir in ten t. T h u s, a
fam ily, em p lo y m en t, o r ag en cy
re la tio n sh ip b e tw e e n tw o p e rs o n s may
b e e v id e n c e o f a n e x p re s s o r im p lied
o b lig a tio n to a c t on th e o th e r’s b e h a lf
w ith re s p e c t to m a n a g e m e n t fun ctio ns.
S im ilarly , th e a b ility to e le c t a d ire c to r
a n d th e e x e rc ise o f th a t ab ility may b e
e v id e n c e o f a n e x p re s s o r im p lied
o b lig a tio n b y th e e le c te d official to the
e le cto r. H o w e v e r, n e ith e r th e
re la tio n sh ip n o r th e e le c tio n o f a
d ire c to r w ill in its e lf c re a te a n e x p re s s
o r im p lied o b lig atio n . In a d d itio n , a
p ro v isio n h a s b e e n a d d e d to th e
d efin itio n specify in g th a t w h e th e r o r n o t
su c h a n o b lig atio n e x ists w ill b e
d e te rm in e d o n a c a s e b y c a s e b a sis
ta k in g in to c o n s id e ra tio n all re le v a n t
fa cts, a n d th e d e te rm in a tio n w ill b e
m a d e o n ly a fte r th e a ffe c te d p e rs o n o r
p e rs o n s a re g iv e n a n o p p o rtu n ity to
re s p o n d .
T h e follow ing is a n e x a m p le o f h o w
th e a g e n c ie s w o u ld a p p ly th e d e fin itio n
o f re p re s e n ta tiv e o r n o m in e e. If A is a
m a n a g e m e n t official o f a b a n k in to w n X
a n d A 's sp o u se B b e c o m e s a
m a n a g e m e n t o fficial a t a n o th e r b a n k in
th e s a m e to w n , th e a p p ro p ria te
su p e rv iso ry a g en cy m a y q u e stio n
w h e th e r B is th e r e p r e s e n ta tiv e o r
n o m in e e o f A. If th e fa c ts in d ic a te th a t B
is n o t a d e q u a te ly q u a lifie d to b e a
m a n a g e m e n t o fficial a n d A w a s
in s tru m e n ta l in p la c in g B in th e p o sitio n ,
th e a g en c ies m a y d e te rm in e th a t B is a
re p r e s e n ta tiv e o r n o m in ee o f A , a fte r A
a n d B a re g iv en a n o p p o rtu n ity to
re s p o n d a n d fail to p re s e n t fa c ts or
a rg u m e n ts to re fu te th e s e fin d ing s.
S itu a tio n s th a t c o u ld w a r r a n t sp e c ia l
sc ru tin y b y th e a g e n c ie s in c lu d e th o s e
in s ta n c e s w h e n a m a n a g e m e n t official
o f a d e p o sito ry o rg a n iz a tio n e le c ts a
d ire c to r to th e b o a r d o f d ire c to rs of
a n o th e r d e p o sito ry o rg a n iz a tio n in th e
sa m e co m m unity, o r a m a jo r sto c k h o ld e r
o f tw o u n a ffilia te d d e p o sito ry
o rg a n iz a tio n s in th e s a m e c o m m u n ity
e le c ts d ire c to rs to b o th o rg a n iz a tio n s.
T h e se s itu a tio n s w a r r a n t c a re fu l re v ie w
sin c e th e a b ility to e le c t o r rem o v e a
d ire c to r d e m o n s tra te s p o te n tia l ab ility
to c o n tro l th e v o tin g re c o rd a n d o th e r
c o n d u c t o f m a n a g e m e n t re s p o n sib ilitie s
b y su ch d ire c to r.
8. Interlocking relationships permitted
by agency order. W h ile th e July
reg u la tio n s p ro v id e e x c e p tio n s to th e
p ro h ib itio n s c o n ta in e d in th e In te rlo c k s
A ct, th e la n g u a g e o f th e e x c e p tio n s
co u ld b e re a d to im p ly th a t in o rd e r to
a p p ly for th e e x c e p tio n , a p e rs o n m u st
be serv in g c u rre n tly a s a m a n a g e m e n t
official o f th e d e p o sito ry o rg a n iz a tio n s
in v o lv e d . T h e a g e n c ie s h a v e a m e n d e d
th e re g u la tio n s to m a k e c le a r th a t a
p e rs o n p ro p o sin g to se rv e a s a
m a n a g e m e n t official a lso m a y a p p ly for
th e e x c e p tio n s. F o r e x a m p le , a p ro p o s e d
d ire c to r o f a S ta te n o n m e m b e r b a n k in
th e p ro c e s s o f o rg a n iz a tio n th a t h a s
a p p lie d to th e FDIC fo r d e p o sit
in s u ra n c e m a y se e k th e a p p ro v a l o f the
B o ard o f D irec to rs o f th e FDIC to s it a s a
d ire c to r o f th e n e w ly -c h a rte re d
in s titu tio n w h ile c o n tin u in g to se rv e
a n o th e r b a n k in th e sa m e co m m u nity.
9. Interlocking relationships perm itted
by agency order—hardship resulting
from change of circumstances. S in ce th e
July re g u la tio n s w e re p u b lish ed , the
ag e n c ie s h a v e re c e iv e d re q u e s ts fo r
e x c e p tio n s from th e A c t b y d e p o sito ry
o rg a n iz a tio n s fa c in g d is ru p tio n o f th e ir
o p e ra tio n s b y th e lo s s of a s u b s ta n tia l
n u m b e r o f m a n a g e m e n t o fficials d u e to
th e a p p lic a tio n o f th e In te rlo c k s A c t a n d
th e reg u latio n s. In v ie w o f th e
C o n g re ssio n a l in te n t to a v o id u n d u e
d is ru p tio n to th e o p e ra tio n s o f
d e p o sito ry o rg a n iz a tio n s, th e ag e n c ie s
b e lie v e it is in k e e p in g w ith th e sp irit o f
th e A ct to a ffo rd so m e re lie f in c e rta in
c a s e s o f u n d u e h a rd s h ip re s u ltin g from
m a n a g e m e n t lo ss. A c co rd in g ly , th e
a g e n c ie s h a v e p ro v id e d a n e x te n s io n o f
th e c o m p lia n c e p e rio d fo r d e p o sito ry
o rg a n iz a tio n s e x p e rie n c in g th e lo ss o f 50
p e r c e n t o r m o re o f th e ir d ire c to rs or
to ta l m a n a g e m e n t o fficials a s a re s u lt o f
c h a n g e s in c irc u m s ta n c e s re q u irin g the
te rm in a tio n o f m a n a g e m e n t in terlo c k s.
U n d e r th e n e w e x ce p tio n , a co m p lia n ce
p e rio d o f u p to 30 m o n th s m a y b e
g ra n te d b y th e a g e n c ie s in o rd e r to
m in im ize th e d is ru p tio n c a u s e d b y th e
d e p a rtu re o f m a n a g e m e n t officials
w h o se se rv ic e is d e te rm in e d to b e
n e c e s s a ry to p ro v id e m a n a g e m e n t o r
o p e ra tin g e x p e rtis e to th e d e p o sito ry
o rg a n iz a tio n . To qu alify fo r th e
ex em p tio n , a d e p o s ito ry o rg a n iz a tio n
m u s t su b m it a p ro p o s a l fo r th e o rd erly
te rm in a tio n o f se rv ic e by a ffe c te d
m a n a g e m e n t o fficials, a n d su ch officials
m u s t a g re e to s e v e r th e ir in te rlo c k in g
re la tio n s h ip s n o la te r th a n 30 m o n th s
a fte r th e e v e n t re q u irin g te rm in a tio n of
th e in te rlo c k .
10.
Grandfathered interlocking
relationships. S e ctio n 206 o f th e
In te rlo c k s A c t g ra n d fa th e rs fo r a p erio d
o f te n y e a rs m a n a g e m e n t official
in te rlo c k s in e x iste n c e o n N o v em b e r 10,
1978, th a t w e re n o t in v io la tio n of
s e c tio n 8 o f th e C la y to n A c t (15 U.S.C.
§ 19) im m e d ia te ly p rio r to th a t d a te . T he
p ro p o s e d a m e n d m e n ts in c lu d e d a
p ro v isio n th a t in te rp re te d th is sec tio n to
m e a n th a t a n y p e rs o n w h o se
in te rlo c k in g p o sitio n a s a m a n a g e m e n t
o fficial m e e ts th e s e re q u ire m e n ts m ay
c o n tin u e to se rv e in th a t p o sitio n until
N o v e m b e r 10,1988. W h ile n o co m m e n ts
w e re re c e iv e d in o p p o sitio n to th is
p ro p o s e d a m e n d m e n t, so m e co m m en ts
in d ic a te d th a t so m e c la rific a tio n is
a p p ro p ria te . In re s p o n se , th e ag en c ie s
e m p h a siz e th a t, in o rd e r to b e eligible
fo r g ra n d fa th e r rig h ts, it is n o t n e c e s s a ry
th a t th e p e rs o n 's in te rlo c k in g se rv ic e b e
o th e rw ise p ro h ib ite d u n d e r s e c tio n s 203
o r 204 o f th e In te rlo c k s A ct. It is
su fficie n t th a t th e in te rlo c k e x iste d p rio r
to N o v e m b e r 10,1978, a n d w a s n o t in
v io la tio n o f se c tio n 8 o f th e C la y to n A ct.
T h e p ro p o s a l h a s b e e n in c o rp o ra te d
w ith o n ly a m in o r c h an g e.
S e v e ra l c o m m e n te rs p o in te d o u t th a t
th e p ro v isio n co u ld b e in te rp re te d to
g ra n d fa th e r se rv ic e a t a d e p o sito ry
in s titu tio n e v e n w h e n n o in te rlo c k w a s
in v o lv ed . It w a s th e a g e n c ie s' in te n tio n
r a th e r to g ra n d fa th e r in terlo c k in g
se rv ic e in e x is te n c e o n N o v e m b e r 10,
1978, a t tw o o r m o re d e p o sito ry
in s titu tio n s. T h e p ro v isio n o n
g ra n d fa th e re d in te rlo c k in g re la tio n sh ip s
h a s b e e n a m e n d e d to re fle c t th is in te n t.
It is n o t su ffic ie n t th a t a p e rs o n se rv e d
a s a m a n a g e m e n t o fficial o f o n ly o n e
d e p o sito ry in s titu tio n o r th a t a p e rs o n
Federal Register / Vol. 45, No. 70 / Wednesday. April 9, 1980 / Rules and Regulations
se rv e d a s a m a n a g e m e n t o fficial o f on ly
o n e d e p o sito ry o rg a n iz a tio n a n d a
n o n d e p o sito ry c o rp o ra tio n . In th is
re g ard , th e a g e n c ie s w ill n o t c o n s id e r a
co m p a n y to b e a d e p o sito ry h oldin g
co m p a n y b y v irtu e o f h a v in g e n te re d
in to a b in d in g c o n tra c t to a c q u ire a
d e p o sito ry in s titu tio n p rio r to N o v e m b e r
10,1978.
11. Grandfathered interlocks— one-
bank holding company formations.
A n o th e r p ro v isio n in th e p ro p o s e d
a m e n d m e n ts p ro v id e d th a t a p e rs o n
se rv in g a s a g ra n d fa th e re d m a n a g e m e n t
official o f tw o o r m o re u n a ffilia te d
d e p o sito ry o rg a n iz a tio n s m a y n o t se rv e
a s a m a n a g e m e n t official o f a d e p o sito ry
h o ld in g co m p a n y c re a te d b y th e
a c q u isitio n o f o n e o f th e in s titu tio n s
w h ile c o n tin u in g to se rv e in a n
in terlo ck in g re la tio n sh ip a t su ch
in stitu tio n s. T h e a g e n c ie s h a v e re v ie w e d
th is p ro v isio n a n d h a v e d e te rm in e d to
e lim in ate it. In effect, th e p ro v isio n
w o u ld h a v e p re v e n te d th e fo rm a tio n o f
o n e -b a n k h o ld in g c o m p a n ie s d e sig n e d
so lely to effe c tu a te a c h a n g e in
c o rp o ra te form . In su c h c a s e s w h e re th e
m a n a g e m e n t o fficials o f th e a c q u ire d
d e p o sito ry in s titu tio n a re id e n tic a l to
th a t o f th e h o ld in g c o m p a n y a n d th e
m a jo rity o w n e rsh ip o f th e h o ld in g
c o m p a n y is id e n tic a l to th a t o f th e
d e p o sito ry in s titu tio n p rio r to th e
a cq u isitio n , th e ag e n c ie s d o n o t b e lie v e
th a t th is ty p e o f in te rn a l re o rg a n iz a tio n
a n d c h an g e o f c o rp o ra te fo rm sh o u ld
a ffec t g ra n d fa th e re d in te rlo c k s. F o r
p ra c tic a l p u rp o se s, th e a g e n c ie s h a v e
d e te rm in e d th a t su ch re o rg a n iz a tio n s
g e n e ra lly do n o t c re a te n e w in te rlo c k s
a n d do n o t a ffec t c o m p e titio n am o n g
d e p o sito ry in stitu tio n s. T h e refo re,
g ra n d fa th e r rig h ts a re n o t a ffe c te d a n d
th e m a n a g e m e n t o fficials in q u e stio n
m a y se rv e th e o n e -b a n k h oldin g
co m p a n y a n d th e o th e r d e p o sito ry
in s titu tio n fo r th e re m a in d e r o f th e
g ra n d fa th e r p e rio d a b s e n t so m e o th e r
c h a n g e o f circ u m sta n c e s.
12. Changes in circumstances—
grandfathered interlocks. S ec tio n 206 of
th e In te rlo c k s A c t p ro v id e s th a t w h e n a
c h a n g e in c irc u m s ta n c e s c a u s e s a
p a rtic u la r in terlo ck in g re la tio n sh ip to
b e co m e p ro h ib ite d , th e ag e n c ie s m a y
p ro v id e a p e rio d o f u p to fifte en m o n th s
fo r th e p ro h ib ite d se rv ic e to b e
te rm in a te d . T h e p ro p o s e d a m e n d m e n ts
c o n ta in e d a p ro v isio n d efin in g th e
p h ra s e “c h a n g e in c irc u m s ta n c e s” a s it
a p p lie s to g ra n d fa th e re d , a s w e ll a s
n o n g ra n d fa th e re d , in te rlo c k s. A m a jo rity
o f th e to ta l co m m e n ts re c e iv e d o n th e
re g u la tio n s d e a lt w ith th is p ro v isio n a s
it a p p lie d to g ra n d fa th e re d in te rlo ck s.
A n u m b e r o f co m m e n te rs o b je c te d to
all o r p a r t o f th e p ro p o s e d a m e n d m e n ts
th a t e n u m e ra te d e v e n ts th a t w o u ld b e
c o n sid e re d a c h a n g e in c irc u m s ta n c e s
c au sin g a lo s s o f g ra n d fa th e r rig h ts. In
la rg e p a r t th e c o m m e n ters o b je c te d th a t
th e a g e n c ie s la c k e d a u th o rity to
te rm in a te g ra n d f a th e r righ ts b y a p p ly in g
c h a n g e s in c irc u m s ta n c e s to
g ra n d fa th e re d in te rlo c k s a n d th a t
d efin in g c e rta in e v e n ts a s c h a n g e s in
c irc u m s ta n c e s w o u ld in h ib it c o m p etitio n
in so m e a r e a s a n d p e n a liz e a g g ressiv e
in s titu tio n s. In v ie w o f th e se c o m m e n ts,
th e a g e n c ie s h a v e ca refu lly re v ie w e d th e
le g islativ e h is to ry o f th e In te rlo c k s A ct,
th e s ta tu to ry la n g u a g e, a n d th e g e n e ra l
la w re g a rd in g a d m in is tra tiv e
ru lem ak in g . It re m a in s th e firm o p in io n
o f th e a g e n c ie s th a t th e In terlo c k s A c t
re q u ire s th e a p p lic a tio n o f th e p h ra s e
“c h a n g e in c irc u m s ta n c e s ” to
g ra n d f a th e re d in te rlo c k s a n d th a t it is
w e ll w ith in th e a g e n c ie s’ re g u lato ry
a u th o rity to a p p ly th e p h ra s e to su c h
in terlo c k s.
T h e lite ra l la n g u a g e o f th e In te rlo c k s
A c t in d ic a te s th a t th e d ra fte rs
c o n te m p la te d th e lo s s o f g ra n d fa th e re d
rig h ts u n d e r c e rta in c irc u m s ta n c e s. T h e
se c o n d s e n te n c e o f se c tio n 206 o f th e
A c t s ta te s th a t th e a p p ro p ria te F e d e ra l
b a n k in g a g e n c ie s m a y p ro v id e a
re a s o n a b le p e rio d o f tim e for
co m p lia n c e w ith th e A c t a fte r a n y
c h a n g e in c irc u m s ta n c e s th a t m a k e s
“su c h s e rv ic e ” p ro h ib ite d b y th is title.
“S u ch s e rv ic e " re fe rs to g ra n d fa th e re d
se rv ic e in th e im m e d ia te ly p re c e d in g
se n te n c e o f s e c tio n 206. M o reov er,
se c tio n 209 o f th e A c t g iv es th e a g e n c ie s
a b r o a d m a n d a te to w rite re g u la tio n s to
c a rry o u t th e p ro v isio n s o f th e A c t a n d
is b ro a d e n o u g h to a u th o riz e re g u la tio n s
c la rify in g th e p ro h ib itio n s o f th e A c t
w ith re s p e c t to th e lo s s o f g ra n d fa th e r
rig h ts. T h e fin a l a m e n d m e n ts, th e refo re ,
re ta in th e p ro v isio n s th a t a p p ly th e
c h a n g e in c irc u m s ta n c e s la n g u a g e to
g ra n d fa th e re d in te rlo c k s.
W ith th e e x c e p tio n n o te d b elo w , th e
a g e n c ie s a lso h a v e re je c te d g e n e ra l
o b je c tio n s to p ro v isio n s w ith in th e
c h a n g e in c irc u m s ta n c e s p ro p o s a ls.
S e v e ra l c o m m e n te rs a s s e rte d th a t
d efin in g c h a n g e in c irc u m s ta n c e s to
in c lu d e m e rg ers, acq u isitio n s,
c o n so lid a tio n s, a n d b ra n c h in g w o u ld
p e n a liz e a g g re s siv e in s titu tio n s b y
forcing th e m to te rm in a te v a lu a b le
m a n a g e m e n t ta le n t w h e n e x p an d in g
th e ir o p e ra tio n s . T h e ag e n c ie s n o te th a t
th e In te rlo c k s A c t its e lf c o n te m p la te s
th a t d e p o sito ry o rg a n iz a tio n s m u st
c h o o se b e tw e e n c o n su m m a tin g c e rta in
tr a n s a c tio n s a n d lo sin g c erta in
m a n a g e m e n t o ffic ia ls in a sm u ch a s th e
sta tu to ry p ro h ib itio n s a re k ey e d to a s s e t
size a n d th e lo c a tio n o f offices. N e ith e r
th e A c t n o r th e re g u la tio n s p ro h ib it
'2 4387
d e p o s ito ry o rg a n iz a tio n s from
e x p a n d in g b y m erg er, ac q u isitio n ,
c o n so lid a tio n , o r b ran c h in g .
T h e p ro p o s e d re g u la tio n s in c lu d e d , a s
a c h a n g e in c irc u m s ta n c e s th a t w o u ld
d e fe a t g ra n d f a th e r rig h ts, a sig n ific a n t
in c re a s e in th e m a n a g e m e n t
re s p o n s ib ilitie s o f a m a n a g e m e n t o fficial
d u e to a c h a n g e in p o s itio n w ith in a n
in te rlo c k e d d e p o sito ry o rg a n iza tio n .
U p o n r e c o n s id e ra tio n , th e a g e n c ie s h a v e
c o n c lu d e d th a t th e in c lu sio n o f th is
p ro v is io n w o u ld h a v e fo s te re d
u n c e rta in ty w ith r e s p e c t to m a n a g e m e n t
o fficials o f n u m e ro u s d e p o sito ry
in s titu tio n s a n d th a t th e p ro v isio n w o u ld
n o t b e su sc e p tib le to c o n siste n t
e n fo rc e m e n t a t th is tim e. T h e a g e n c ie s
re m a in o f th e op inion, h o w e v e r, th a t th e
la n g u a g e o f se c tio n 206 o f th e In te rlo c k s
A c t c o u ld b e co rre c tly in te rp re te d to
re q u ire te rm in a tio n o f g ra n d fa th e re d
s e rv ic e d u e to a n y c h a n g e in p o sitio n
a n d re s e rv e th e a u th o rity to a d o p t th is
in te rp r e ta tio n in th e fu tu re sh o u ld it
a p p e a r a p p ro p ria te to d o so for p u rp o s e s
o f p ro p e rly a d m in is te rin g th e In te rlo c k s
A c t. It sh o u ld b e n o te d th a t d e le tio n o f
th e p ro v isio n fro m th e fin a l re g u la tio n
w ill n o t a ffe c t th e m a n n e r in w h ic h th e
p ro h ib itio n s o f th e In te rlo c k s A c t a p p ly
to m a n a g e m e n t officials w h o sh ift
p o sitio n s am o n g a ffilia te d d e p o sito ry
in s titu tio n s.
A d is c u s s io n o f e a c h ty p e o f c h a n g e in
c irc u m s ta n c e s th a t w ill affe ct
g ra n d f a th e re d in te rlo c k s follow s: (a)
Acquisitions, mergers, and
consolidations. M erg ers, a c q u isitio n s, o r
c o n s o lid a tio n s w ill te rm in a te
g ra n d f a th e r rig h ts fo r a n in terlo c k in g
re la tio n s h ip in th o s e s itu a tio n s w h e re
o n e o f th e in te rlo c k e d d e p o sito ry
o rg a n iz a tio n s is m e rg e d w ith , a c q u ire s
o r is a c q u ire d b y , o r is c o n s o lid a te d w ith
a n o th e r d e p o sito ry o rg a n iz a tio n w h ich ,
im m e d ia te ly p rio r to th e tra n sa c tio n ,
w a s a n o rg a n iz a tio n fo r w h ic h th e
in te rlo c k in g p e rs o n c o u ld n o t h a v e
se rv e d a s a m a n a g e m e n t official u n d e r
s e c tio n s 203 o r 204 o f the In te rlo c k s A ct.
T h e la n g u a g e o f th is p ro v isio n h a s b e e n
sim p lified fro m th a t p ro p o s e d in July
a n d d o e s n o t e ffe c t a n y su b s ta n tiv e
c h a n g e . F o r th e p u rp o s e s o f d e te rm in in g
th e d a te o n w h ic h th e c h a n g e in
c irc u m s ta n c e s o c cu rs, a m erger,
a c q u isitio n , o r c o n so lid a tio n is
c o n s id e re d to h a v e o c c u rre d u p o n
c o n su m m a tio n . O p e ra tio n of this
p a ra g r a p h is illu s tra te d b y th e fo llow in g
e x am p le :
D irector X’s service a s a director of B ank A
a n d B ank D, b oth lo ca ted in SMSA 1, is
g randfathered. D irector Y’s service a s a
director of Bank B a n d B ank C, b oth located
in SM SA 1, is also g ra n d fath ere d . A ll of the
b a n k s h ave a sse ts o f o v e r $20 m illion but
u n d e r $500 million. BHC I, w hich is located in
24388
Federal Register / Vol. 45, No. 70 / Wednesday, April 9, 1980 / Rules and Regulations
SM SA 1 a n d ow ns B ank B, acquires B ank A
a n d m erges it w ith B ank B.
D irector X 's gran d fath er rights a re defeated
for e ith e r of tw o reasons: (1) U nder section
203, B H C I is a depository organization for
w hich X could n ot h a v e serv ed a s a
m anagem ent official im m ediately prior to the
acquisition, or (2) un d er section 203, B ank B
is a depository organization for w hich X
could n o t h ave serv ed a s a m anagem ent
official im m ediately p rior to the m erger. Thus,
X w ould have to decide w h eth er to continue
service w ith B ank A o r Bank D.
D irector Y 's gran d fath er rights w ith respect
to his service w ith B anks B a n d C are
defeated because, u n d e r section 203, Bank A
is a depository organization for w hich Y
could not have served im m ediately p rior to
the m erger. Y, thus, w ould h av e to d ecide
w h eth er to continue service w ith B ank B or
B ank C.
In a d d itio n , a p ro v isio n h a s b e e n
a d d e d in th e re g u la tio n is s u e d b y th e
F e d e ra l H o m e L o a n B an k B o a rd th a t
a ffe c ts th e m a n n e r in w h ic h th e
p ro v isio n w ill b e a p p lie d to a c q u isitio n s
b y d iv e rsifie d sa v in g s a n d lo a n h o ld in g
c o m p a n ie s. T h e p ro v isio n s ta te s th a t, for
p u rp o s e s o f § 563f.6(a)(l)(i) o f th e
F e d e ra l H o m e L o an B an k B o a rd 's
reg u la tio n , th e te rm "d e p o s ito ry
o rg a n iz a tio n ” in c lu d e s a n o n d e p o sito ry
c o rp o ra tio n th a t w ill b eco m e, a s a re s u lt
o f a n a c q u isitio n o f a sa v in g s a n d lo a n
a ss o c ia tio n , a d iv e rsifie d sa v in g s a n d
lo a n h o ld in g c o m p an y . T h e a m e n d m e n t
w o u ld te rm in a te th e g ra n d fa th e r rig h ts
o f a m a n a g e m e n t official o f a sav in g s
a n d lo a n a s s o c ia tio n th a t is a c q u ire d b y
a n o n d e p o sito ry c o rp o ra tio n fo r w h ich
th e m a n a g e m e n t o fficial co u ld n o t h a v e
se rv e d p rio r to th e tr a n s a c tio n h a d th e
c o rp o ra tio n b e e n a d e p o sito ry
o rg a n iz a tio n . T h e a d d itio n re fle c ts th e
o rig in al in te n tio n o f th e F e d e ra l H o m e
L o an B a n k B o a rd th a t th e g ra n d fa th e re d
rig h ts o f a m a n a g e m e n t o fficial o f a
sa v in g s a n d lo a n a s s o c ia tio n th a t is
a c q u ire d b y a d iv e rsifie d sa v in g s a n d
lo a n h o ld in g c o m p a n y sh o u ld b e
te rm in a te d .
(b)Branching. Newly established
branches will terminate grandfather
rights in those situations where one of
the depository organizations involved in
the grandfathered interlocking
relationship, or its depository institution
affiliate, establishes an office in the
same community as the other depository
organization, or itsdepository institution
affiliate,where no such office existed
previously; or where both depository
organizations, or their depository
institution affiliates, establish an office
in a community or SMSA where neither
previously had an office. For example, if
a person’s service as a director of Bank
A and Bank B located in different cities
in the same SMSA isgrandfathered and
Bank A establishes its firstbranch in a
c ity w h e re B an k B a lre a d y h a s a b ra n c h
o r its m a in office, th e n th e p e rs o n ’s
g ra n d fa th e re d rig h ts w o u ld b e
te rm in a te d . H o w e v e r, if B a n k A a n d
B an k B e a c h h a v e a b r a n c h lo c a te d in
th e sam e city, th e n th e b a n k s m a y
e s ta b lis h a d d itio n a l b ra n c h e s in th a t
c ity (a n d a d ja c e n t a n d c o n tig u o u s citie s
th e re to ) w ith o u t affe ctin g th e p e rs o n ’s
g ra n d fa th e r righ ts.
13. Changes in circumstances— nongrandfatheredinterlocks. T h e p ro p o s e d
a m e n d m e n ts id e n tifie d s e v e ra l e v e n ts
th a t w o u ld c a u s e a n o n -g ra n d fa th e re d
m a n a g e m e n t o fficial in te rlo c k to b e co m e
p ro h ib ite d . (A n o n -g ra n d fa th e re d
in te rlo c k is a n y in te rlo c k c re a te d a fte r
N o v e m b e r 1 0,1978, o r a n in te rlo c k th a t
w a s in v io la tio n of se c tio n 8 o f th e
C la y to n A c t o n th a t d a te .) In th e c a s e of
c e rta in in v o lu n ta ry e v e n ts (fo r e x am p le ,
m a te ria l g ro w th in a s s e t size, c h a n g e in
S M S A o r c o m m u n ity b o u n d a rie s,
d e sig n a tio n o f n e w SM SA ), th e
o rg a n iz a tio n s a u to m a tic a lly w o u ld b e
g iv e n fifte e n m o n th s to co n fo rm to th e
In te rlo c k s A c t u n le s s th e a p p ro p ria te
a g e n c y o r a g e n c ie s a c te d to e s ta b lis h a
s h o r te r p erio d . In th e e v e n t o f c e rta in
v o lu n ta ry e v e n ts (m erg ers, a c q u isitio n s,
c o n so lid a tio n s, b ra n c h in g ), th e
o rg a n iz a tio n s w o u ld b e g iv e n u n til th e
n e x t a n n u a l s h a r e h o ld e rs ’ m e e tin g to
co n fo rm to th e In te rlo c k s A ct. A n
e x te n s io n o f u p to fifte e n m o n th s w o u ld
b e a v a ila b le . It sh o u ld b e n o te d th a t th e
liste d e v e n ts a re n o t e x h a u s tiv e o f all
su c h e v e n ts th a t m a y c a u s e a n in te rlo c k
to b ec o m e p ro h ib ite d .
T h e a g e n cie s h a v e re lie d o n th e
ru lem ak in g a u th o rity in se c tio n 209 of
th e In te rlo c k s A ct to a p p ly th e c h a n g e in
c irc u m s ta n c e s re s tric tio n s to n o n
g ra n d fa th e re d in te rlo c k s in a d d itio n to
g ra n d fa th e re d in te rlo c k s. In a s m u c h a s
th e a g e n c ie s re c ie v e d n o u n fa v o ra b le
co m m e n ts c o n c e rn in g th e s e p ro v isio n s,
th e a g e n c ie s a re re ta in in g th e m in th e
fin a l a m e n d m e n ts w ith a m in o r c h an g e
a s n o te d in p a ra g r a p h fo u rte e n o f th e
d is c u ssio n b elo w .
14. Changes in circumstances—
complianceperiod. T h e p ro p o s e d
a m e n d m e n ts lis te d c h a n g e s in
c irc u m s ta n c e s w h ich , if th e y o c c u rre d
a fte r M a rc h 9,1979, w o u ld re q u ire th e
te rm in a tio n o f g ra n d fa th e re d
in terlo c k in g se rv ic e. T h e p ro p o s e d
a m e n d m e n ts w e re b a s e d o n se c tio n 206
o f th e In te rlo c k s A ct, w h ic h p ro v id e s
th a t w h e n a c h a n g e in c irc u m s ta n c e s
c a u s e s a p a rtic u la r in terlo c k in g
re la tio n sh ip b e tw e e n tw o d e p o sito ry
o rg a n iz a tio n s to b ec o m e p ro h ib ite d , th e
a g e n c ie s m a y a llo w th e re la tio n sh ip to
c o n tin u e fo r a p e rio d o f tim e n o t
e x c e e d in g 15 m o n th s from th e d a te o n
w h ic h th e re la tio n s h ip b e c a m e
p ro h ib ite d . T h e a g e n c ie s p ro p o s e d th e
M a rc h 9 d a te b e c a u s e M a rc h 10,1979,
w a s th e effe ctiv e d a te o f th e In te rlo c k s
A c t a n d th u s w a s th e d a te u p o n w h ic h
th e p ro h ib itio n s o f th e In te rlo c k s A c t
b e c a m e a p p lic a b le to in terlo c k in g
re la tio n sh ip s. A n u m b e r o f co m m e n te rs
felt th a t th e M a rc h 9 d a te w a s
in a p p ro p ria te sin c e th e p ro p o s e d
a m e n d m e n ts w e re n o t p u b lis h e d u n til
July 19,1979. T h e c o m m e n te rs a s s e r te d
th a t m a n y d e p o sito ry o rg a n iz a tio n s
w o u ld h a v e stru c tu re d v a rio u s
tr a n s a c tio n s in a d iffe re n t m a n n e r h a d
th e y b e e n a w a re o f th e e x a c t n a tu re o f
th e e v e n ts th a t w o u ld te rm in a te
g ra n d fa th e r rig h ts. S o m e c o m m e n te rs
a ls o a s s e rte d th a t p u b lic a tio n o f th e
re g u la tio n s a t a tim e w h e n m a n y
d e p o sito ry o rg a n iz a tio n s a re h o ld in g
th e ir a n n u a l m e e tin g s w o u ld c a u s e
h a rd s h ip fo r so m e o rg a n iz a tio n s w h ic h
h a v e a lre a d y s e n t o u t n o tic e s to
s h a re h o ld e rs n o m in a tin g d ire c to rs a n d
h a v e a n n u a l m e e tin g s s c h e d u le d to
o c c u r sh o rtly . T h e c o m m e n te rs th e re fo re
su g g e ste d th a t th e a g e n c ie s a m e n d th e
d a te a fte r w h ic h c h a n g e s in
c irc u m s ta n c e s w o u ld te rm in a te
g ra n d fa th e r rights.
In re s p o n s e to th e s e co m m en ts, th e
a g e n c ie s h a v e a m e n d e d th e c h a n g e in
c irc u m s ta n c e s p ro v isio n to p ro v id e a n
a d d itio n a l g ra c e p e rio d fo r c o m p lia n ce
in c a s e s w h e re a c h a n g e in c irc u m s ta n c e
re q u irin g te rm in a tio n o f g ra n d fa th e r
rig h ts o c c u rre d p rio r to th e effectiv e
d a te o f th e s e fin al a m e n d m e n ts. T h e
a g e n c ie s d o n o t b e lie v e it is a p p ro p ria te
to ignore c h a n g e s th a t o c c u rre d p rio r to
th e d a te o f th e p ro p o s e d a m e n d m e n ts,
a s so m e c o m m e n te rs su g g ested , sin c e to
d o so w o u ld p e rm it u n in te rru p te d
se rv ic e u n til 1988 c o n tra ry to the
p ro h ib itio n s o f th e In te rlo c k s A ct. T h us,
a n e v e n t fallin g w ith in th e c a te g o rie s o f
c h a n g e s in c irc u m s ta n c e s w ill b e
c o n s id e re d a c h a n g e th a t te rm in a te s
g ra n d f a th e r rig h ts. H o w e v er, if th a t
e v e n t o c c u rre d p rio r to th e e ffectiv e d a te
o f th e final a m e n d m e n ts, th e g ra c e
p e rio d w ill co m m e n ce o n th e e ffec tiv e
d a te o f th e a m e n d m e n ts. T h e re g u la tio n s
a lso g ra n t a g ra c e p e rio d to p e rs o n s
w h o s e g ra n d fa th e re d se rv ic e w a s
p ro h ib ite d o n M a rc h 10,1979, d u e to a
c h a n g e in c irc u m s ta n c e s o cc u rrin g
b e tw e e n N o v e m b e r 10,1978, a n d M a rc h
9,1979. W ith o u t su c h a g ra c e p e rio d , th e
In te rlo c k s A c t w o u ld n e c e s s ita te
im m e d ia te te rm in a tio n o f su c h serv ice.
T h e p ro v isio n s o f th e p ro p o s e d
a m e n d m e n ts co n c e rn in g n o n
g ra n d fa th e re d in te rlo c k s th a t b e c o m e
p ro h ib ite d a s a re s u lt o f a c h a n g e in
c irc u m s ta n c e s a lso h a v e b e e n re w ritte n
to a p p ly th e g ra c e p e rio d to in te rlo ck in g
se rv ic e th a t b e c o m e s p ro h ib ite d a s a
Federal Register / Vol. 45, No. 70 / Wednesday, April 9, 1980 / Rules and Regulations
re s u lt o f a c h a n g e in c irc u m sta n c e s. T h e
a g e n c ie s a re m a k in g th e a b o v e c h a n g e s
p u rs u a n t to th e ir a u th o rity u n d e r s e c tio n
209 o f th e In te rlo c k s A c t to p erm it
se rv ic e th a t is o th e rw ise p ro h ib ited .
banks, bank holding companies, and
their affiliates.
§212.2
Definitions.
For the purpose of this part, the
The proposed amendments stated that following definitions apply:
(a) “Adjacent cities, towns, or
a person may continue to serve for a
certain period as a management official villages” means cities,towns or villages
whose borders are within ten road miles
of “both organizations” involved in the
of each other at their closest points. The
prohibited interlocking relationship.
Since many interlocks involve more than property line of an office located in an
unincorporated city, town, or village is
two organizations, the language has
regarded as the boundary line of that
been revised to make clear that the
city, town, or village for the purpose of
person may continue to serve as a
t
his definition.
management official of “all”
(b) “Affiliate” has the meaning given
organizations involved in the prohibited
in section 202 of the Interlocks Act. For
interlocking relationship.
purposes of section 202, an individual's
A cco rd in g ly , th e B o a rd o f G o v ern o rs
shares include shares ofmembers of his
o f th e F e d e ra l R e serv e S y stem , th e
or
her immediate family. For the purpose
C o m p tro ller o f th e C u rren cy , th e F e d e ra l
of section 202(3)(B) of the Interlocks Act,
D e p o sit In s u ra n c e C o rp o ra tio n , th e
an affiliate relationship based on
F e d e ra l H o m e L oan B an k B oard, a n d th e
common ownership does not exist ifthe
N a tio n a l C re d it U n io n A d m in istra tio n
appropriate Federal supervisory agency
a m e n d 12 CFR b y re v isin g P a rts 212, 26,
or agendes determine, aftergiving the
348, 563f, a n d 711, re sp e c tiv e ly , to re a d
affected persons the opportunity to
a s follow s:
respond, that the asserted affiliation
appears to have been established in
order to avoid the prohibitions of the
FEDERAL RESERVE SYSTEM
Interlocks Act and does not represent a
true commonality of interest between
12 CFR Part 212
the depository organizations. In making
[Regulation L—Docket No. R-0198]
this determination, the agencies will
consider, among other things, whether a
PART 212—MANAGEMENT OFFICIAL
person, including members ofhis or her
INTERLOCKS
immediate family, whose shares are
necessary to constitute the group owns a
Sec.
nominal percentage of the shares of one
212.1 A uthority, purpose, a n d scope.
of the organizations and the percentage
212.2 Definitions.
212.3 G eneral prohibitions.
is substantially disproportionate with
212.4 Perm itted Interlocking R elationships.
that person’s ownership of shares in the
212.5 G ran d fath ered Interlocking
other organization. “Immediate family”
R elationships.
includes spouse, mother, father, child,
212.6 C hanges in circum stances.
grandchild, sister, brother, or any of
212.7 Effect of Interlocks A ct on C layton
their spouses, whether or not any of
Act.
their shares are held in trust
212.8 Enforcem ent.
(c) "Community” means city, town, or
A uthority: D epository Institution
village, or contiguous or adjacent cities,
M anagem ent Interlocks A ct ("Interlocks
towns, or villages.
A ct” ) (12 U.S.C. 3201 et seq.)
(d) "Contiguous cities, towns, or
§212.1 Authority, purpose, and scope.
villages” means cities, towns, or villages
(a) Authority. T h is p a rt is is su e d
whose borders actually touch each
u n d e r th e p ro v isio n s o f th e D e p o sito ry
other.
In s titu tio n M a n a g e m e n t In te rlo c k s A c t
(e) “Depository holding company”
("In te rlo c k s A c t”) (12 U.S.C. 3210 et
means a bank holding company or a
seq.).
savings and loan holding company (as
(b) Purpose and scope. T h e g e n e ra l
more fully defined in section 202 of the
p u rp o s e o f th e In te rlo c k s A c t a n d th is
Interlocks Act) having itsprincipal
p a r t is to fo s te r co m p e titio n b y g e n e ra lly
office located in the United States.
p ro h ib itin g a m a n a g e m e n t official o f a
(f) "Depository institution” means a
d e p o s ito ry in s titu tio n o r d e p o sito ry
commercial bank (including a private
h o ld in g c o m p a n y from a ls o se rv in g a s a
bank), a savings bank, a trust company,
m a n a g e m e n t official o f a n o th e r
a savings and loan association, a
d e p o s ito ry in s titu tio n o r d e p o sito ry
building and loan association, a
h o ld in g c o m p a n y if th e tw o
homestead association, a cooperative
o rg a n iz a tio n s (1) a r e n o t a ffilia te d a n d
bank, an industrial bank, or a credit
(2) a re v e ry la rg e o r a re lo c a te d in th e
union, chartered in the United States
s a m e lo c a l a re a . T h is p a r t a p p lie s to
and having a principal office located in
m a n a g e m e n t o fficials o f S ta te m e m b e r
the United States. Additionally, a United
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S ta te s office, in c lu d in g a b ra n c h o r
a g en cy , o f a fo reig n c o m m e rc ia l b a n k is
a "d e p o s ito ry in s titu tio n .”
(g) " D e p o sito ry o rg a n iz a tio n ” m e a n s a
d e p o s ito ry in s titu tio n o r a d e p o sito ry
h o ld in g c o m p an y .
(h) " M a n a g e m e n t o ffic ia l” m e a n s a n
e m p lo y e e o r o ffic er w ith m a n a g e m e n t
fu n c tio n s (in clu d in g a b ra n c h m a n ag e r),
a d ire c to r (in clu d in g a n a d v iso ry
d ire c to r o r h o n o ra ry d irec to r), a tru s te e
o f a b u s in e s s o rg a n iz a tio n u n d e r th e
c o n tro l o f tr u s te e s [e.g., a m u tu a l sa v in g s
b a n k ), o r a n y p e rs o n w h o h a s a
re p r e s e n ta tiv e o r n o m in e e serv in g in
a n y su c h c a p a c ity . "M a n a g e m e n t
o fficial” d o e s n o t m e a n a p e rs o n w h o s e
m a n a g e m e n t fu n c tio n s re la te
e x c lu siv e ly to th e b u s in e s s o f re ta il
m e rc h a n d is in g o r m a n u fa c tu rin g , fo r th e
p u rp o s e s o f se c tio n 212.3(c) o f th is P a rt,
a n d d o e s n o t m e a n a p e rs o n w h o se
m a n a g e m e n t fu n c tio n s r e la te p rin c ip a lly
to th e b u s in e s s o u ts id e th e U n ite d S ta te s
o f a fo reig n c o m m e rcia l b a n k .
" M a n a g e m e n t o fficial” d o e s n o t in c lu d e
p e rs o n s d e s c rib e d in th e p ro v iso s o f
se c tio n 202(4) o f th e In te rlo c k s A ct.
(i) “O ffice ” o f a d e p o s ito ry in s titu tio n
m e a n s a p rin c ip a l office o r a b ra n c h
office lo c a te d in th e U n ite d S ta te s, b u t
d o e s n o t in c lu d e a r e p r e s e n ta tiv e office
o f a fo reig n co m m e rc ia l b a n k , a n
e le c tro n ic te rm in a l, o r a lo a n p ro d u c tio n
office. “O ffice” o f a d e p o s ito ry h o ld in g
c o m p a n y m e a n s its p rin c ip a l c o rp o ra te
h e a d q u a rte rs .
(j) “P e rs o n ” m e a n s a n a tu r a l p e rso n ,
c o rp o ra tio n , o r o th e r b u sin e ss.
(k) " R e p re s e n ta tiv e o r n o m in e e ”
m e a n s a p e rs o n w h o s e rv e s a s a
m a n a g e m e n t o fficial a n d h a s a n e x p re s s
o r im p lied o b lig a tio n to a c t o n b e h a lf o f
a n o th e r p e rs o n w ith re s p e c t to
m a n a g e m e n t re s p o n sib ilitie s. W h e th e r a
p e rs o n is a “re p r e s e n ta tiv e o r n o m in e e ”
d e p e n d s u p o n th e fa c ts in in d iv id u a l
c a se s , a n d th e a p p ro p r ia te F e d e ra l
su p e rv iso ry a g e n c y o r a g e n c ie s w ill
d e te rm in e , a fte r giving th e a ffe c te d
p e rs o n s a n o p p o rtu n ity to re s p o n d ,
w h e th e r a p e rs o n is a “r e p r e s e n ta tiv e o r
n o m in e e .” C e rta in re la tio n sh ip s,
in c lu d in g fam ily , e m p lo y m e n t o r a g e n c y
re la tio n sh ip s, o r th e a b ility a n d e x e rc is e
o f a b ility b y a s h a r e h o ld e r o f a
d e p o sito ry o rg a n iz a tio n to e le c t a
d ire c to r m a y b e e v id e n c e o f su c h a n
e x p re s s o r im p lied o b lig a tio n b y th e
m a n a g e m e n t o fficial to a n o th e r p e rs o n .
F o r th e p u rp o s e s o f th is d efin itio n ,
“p e rs o n ” sh a ll in c lu d e o n ly n a tu ra l
p e rs o n s.
(1)
"T o ta l a s s e ts ” m e a n s a s s e ts
m e a s u re d on a c o n s o lid a te d b a s is a s o f
th e c lo se o f th e o rg a n iz a tio n ’s la s t fisc a l
y e a r. T h e to ta l a s s e ts o f a d e p o sito ry
h o ld in g c o m p a n y in c lu d e th e to ta l a s s e ts
o f its d e p o sito ry in s titu tio n a ffilia te s fo r
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Federal Register / Vol. 45, No. 70 / Wednesday, April 9, 1980 / Rules and Regulations
th e p u rp o s e s o f § 212.3(b) o f th is p a rt,
a n d in c lu d e th e to ta l a s s e ts o f a ll o f its
a ffilia te s fo r p u rp o s e s o f § 212.3(c). T o ta l
a s s e ts o f a U n ite d S ta te s b ra n c h o r
a g e n c y o f a fo reig n c o m m e rcia l b a n k
m e a n s to ta l a s s e ts o f s u c h b ra n c h o r
a g e n c y its e lf e x c lu siv e o f th e a s s e ts of
th e o th e r o ffices o f th e foreign
c o m m e rc ia l b a n k .
(m) “U n ite d S ta te s ” m e a n s a n y S ta te
o f th e U n ite d S ta te s, th e D istric t of
C o lu m b ia, a n y te rrito ry o f th e U n ite d
S ta te s, P u e rto Rico, G uam , A m e ric a n
S am o a , o r th e V irgin Is la n d s.
§ 212.3 General prohibitions.
(a) Community. A m a n a g e m e n t
o fficial o f a d e p o sito ry o rg a n iz a tio n m a y
n o t se rv e a t th e s a m e tim e a s a
m a n a g e m e n t o fficial o f a n o th e r
d e p o sito ry o rg a n iz a tio n n o t a ffilia te d
w ith it if: (1) O ffic es o f b o th a re lo c a te d
in th e sa m e com m u n ity; (2) o ffices o f
d e p o s ito ry in s titu tio n a ffilia te s o f b o th
a r e lo c a te d in th e sa m e co m m u n ity ; o r
(3) a n office o f o n e o f th e d e p o sito ry
o rg a n iz a tio n s is lo c a te d in th e sa m e
c o m m u n ity a s a n office o f a d e p o sito ry
in s titu tio n a ffilia te o f th e o th er.
(b) SMSA. A m a n a g e m e n t o fficial o f a
d e p o s ito ry o rg a n iz a tio n m a y n o t se rv e
a t th e sa m e tim e a s a m a n a g e m e n t
o fficial o f a n o th e r d e p o sito ry
o rg a n iz a tio n n o t a ffilia te d w ith it if: (1)
O ffices o f b o th a re lo c a te d in th e sam e
S ta n d a rd M e tro p o lita n S ta tis tic a l A re a
(“S M SA ”) a n d e ith e r h a s to ta l a s s e ts o f
$20 m illio n o r m ore; (2) o ffices of
d e p o sito ry in s titu tio n a ffilia te s o f b o th
a re lo c a te d in th e s a m e S M S A a n d
e ith e r o f th e d e p o sito ry in s titu tio n
a ffilia te s h a s to ta l a s s e ts o f $20 m illio n
o r m ore; o r (3) a n office o f o n e o f th e
d e p o sito ry o rg a n iz a tio n s is lo c a te d in
th e s a m e S M S A a s a n office o f a
d e p o sito ry in s titu tio n a ffilia te o f th e
o th e r a n d e ith e r th e d e p o sito ry
o rg a n iz a tio n o r th e d e p o sito ry
in s titu tio n affiliate h a s to ta l a s s e ts of
$20 m illio n o r m ore.
(c) Major Assets. W ith o u t re g a rd to
lo c a tio n , a m a n a g e m e n t o fficial o f a
d e p o sito ry o rg a n iz a tio n w ith to ta l a s s e ts
e x c e e d in g $1 b illio n o r a m a n a g e m e n t
o fficial o f a n y a ffilia te o f th e g re a te r
th a n $1 b illio n d e p o s ito ry o rg a n iz a tio n
m a y n o t se rv e a t th e s a m e tim e a s a
m a n a g e m e n t o fficial o f a n o n a ffilia te d
d e p o s ito ry o rg a n iz a tio n w ith to ta l a s s e ts
e x c e e d in g $500 m illio n o r a m a n a g e m e n t
o fficial o f a n y a ffilia te o f th e g re a te r
th a n $500 m illio n d e p o sito ry
o rg a n iza tio n .
§ 212.4 Permitted interlocking
relationships.
(a)
Interlockingrelationships
permittedby statute. T h e p ro h ib itio n s
S 212.3 d o n o t a p p ly in th e c a s e o f a n y
of
o n e o r m o re o f th e follo w in g
o rg a n iz a tio n s o r th e ir su b sid ia rie s:
(1) A d e p o s ito ry o rg a n iz a tio n th a t
d o e s n o t do b u s in e s s w ith in th e U n ite d
S ta te s e x c e p t a s a n in c id e n t to its
a c tiv itie s o u ts id e th e U n ite d S ta te s;
(2) A c o rp o ra tio n o p e ra tin g u n d e r
s e c tio n 25 o r 25(a) o f th e F e d e ra l
R e se rv e A c t (“E d g e C o rp o ra tio n s” a n d
“A g re e m e n t C o rp o ra tio n s ”);
(3) A d e p o s ito ry o rg a n iz a tio n th a t h a s
b e e n p la c e d fo rm a lly in liq u id atio n , or
th a t is in th e h a n d s o f a receiv er,
c o n se rv a to r, o r o th e r official ex e rcisin g
a sim ila r fu n ctio n;
(4) A c re d it u n io n b ein g se rv e d b y a
m a n a g e m e n t o ffic ia l o f a n o th e r c re d it
u n ion ;
(5) A State-chartered savings and loan
guaranty corporation; or
(6) A F e d e ra l H o m e L oan B an k o r a n y
o th e r b a n k o rg a n iz e d so lely fo r th e
p u rp o se o f s e rv in g d e p o sito ry
in s titu tio n s (c o m m o n ly re fe rre d to a s
“b a n k e rs ' b a n k s ”) o r so lely fo r th e
p u rp o s e o f p ro v id in g se c u ritie s c le a rin g
se rv ic e s a n d s e rv ic e s re la te d th e re to fo r
d e p o sito ry in s titu tio n s, se c u ritie s
c o m p a n ie s, o r b o th .
(b) Interlockingrelationships
permittedby Board order. A
m a n a g e m e n t o fficial o r a p ro sp e c tiv e
m a n a g e m e n t o fficial o f a S ta te m e m b e r
b a n k , b a n k h o ld in g c o m p a n y , o r affilia te
o f e ith e r m a y a p p ly fo r th e B o a rd ’s p rio r
a p p ro v a l to e n te r in to a re la tio n sh ip
in v o lv in g a n o th e r d e p o sito ry
o rg a n iz a tio n th a t w o u ld o th e rw ise b e
p ro h ib ite d u n d e r § 212.3, if th e
re la tio n s h ip fa lls w ith in a n y o f the
c la ssific a tio n s e n u m e ra te d in th is
p a ra g ra p h . If th e re la tio n sh ip in v o lv es a
d e p o s ito ry o rg a n iz a tio n su b je c t to th e
su p e rv isio n o f a n o th e r F ed era l
su p e rv iso ry a g e n c y a s sp e cified in
se c tio n 207 o f th e In te rlo c k s A ct, th e
m a n a g e m e n t o fficial o r p ro sp e c tiv e
m a n a g e m e n t o fficial m u st also o b ta in
th e p rio r a p p ro v a l o f th a t o th e r ag en cy .
(1) Organization in low income area;
minority or women’
s organization. A
p e rs o n m a y s e rv e a t th e sam e tim e a s a
m a n a g e m e n t o fficial o f tw o o r m o re
d e p o sito ry o rg a n iz a tio n s (or a ffilia te s
th e reo f) if o n e o f th e d ep o sito ry
o rg a n iz a tio n s is (i) lo c a te d , o r to b e
lo c a te d , in a lo w in co m e o r o th e r
e c o n o m ic a lly d e p re s s e d a re a , o r (ii)
c o n tro lle d o r m a n a g e d b y p e rs o n s w h o
a r e m e m b e rs o f m in o rity g ro u p s o r b y
w o m en , s u b je c t to th e follow ing
c o n d itio n s: (A) T h e a p p ro p ria te F e d e ra l
su p e rv iso ry a g e n c y o r ag en c ie s
d e te rm in e th e re la tio n sh ip to b e
n e c e s s a ry to p ro v id e m a n a g e m e n t o r
o p e ra tin g e x p e rtis e to th e o rg a n iz a tio n
sp e c ifie d in P a ra g ra p h (b)(l)(i) o r (ii) o f
this; (B) n o in terlo c k in g re la tio n sh ip
p e rm itte d b y th is p a ra g ra p h sh a ll
co n tin u e fo r m o re th a n fiv e y e a rs ; a n d
(C) o th e r c o n d itio n s in a d d itio n to o r in
lieu o f th e foreg o ing m a y b e im p o se d b y
th e a p p ro p ria te F e d e ra l su p e rv iso ry
a g e n c y o r a g e n c ie s in a n y sp ec ific c ase .
(2) Newly-charteredorganization. A
p e rs o n m a y se rv e a t th e s a m e tim e a s a
m a n a g e m e n t o fficial o f tw o o r m o re
d e p o s ito ry o rg a n iz a tio n s if o n e o f th e
d e p o s ito ry o rg a n iz a tio n s (o r a n a ffilia te
th e reo f) is a n e w ly -c h a rte re d
o rg a n iz a tio n , s u b je c t to th e follow ing
c o n d itio n s: (i) T h e a p p ro p ria te F e d e ra l
su p e rv iso ry a g e n c y o r a g e n cie s
d e te rm in e th e re la tio n sh ip to b e
n e c e s s a ry to p ro v id e m a n a g e m e n t or
o p e ra tin g e x p e rtis e to th e n e w ly c h a rte re d o rg an iz atio n ; (ii) n o
in te rlo c k in g re la tio n sh ip p e rm itte d b y
th is p a ra g r a p h sh a ll co n tin u e fo r m o re
th a n tw o y e a rs a fte r th e n e w ly c h a rte re d o rg a n iz a tio n c o m m en ces; a n d
(iii) o th e r c o n d itio n s in a d d itio n to or in
lie u o f th e fo reg o in g m a y b e im p o se d b y
th e a p p ro p ria te F e d e ra l su p e rv iso ry
a g e n c y o r a g e n c ie s in a n y sp e cific c ase.
(3) Conditions endangering safetyor
soundness. A p e rs o n m a y se rv e a t the
s a m e tim e a s a m a n a g e m e n t o fficial o f
tw o o r m o re d e p o sito ry o rg a n iz a tio n s
(o r a ffilia te s th e reo f) if th e p rim a ry
F e d e ra l su p e rv iso ry a g e n c y o f o n e of th e
d e p o sito ry o rg a n iz a tio n s b e lie v e s th a t
su c h d e p o sito ry o rg a n iz a tio n fa c e s
c o n d itio n s e n d a n g e rin g th e
o rg a n iz a tio n ’s s a fe ty o r so u n d n e s s,
su b je c t to th e fo llo w ing c o n d itio n s: (i)
T h e a p p ro p ria te F e d e ra l su p erv iso ry
a g e n c y o r a g e n c ie s d e te rm in e th e
re la tio n s h ip to b e n e c e s s a ry to p ro v id e
m a n a g e m e n t o r o p e ra tin g e x p e rtis e to
th e o rg a n iz a tio n facin g c o n d itio n s
e n d a n g e rin g s a fe ty o r so u n d n e s s; a n d
(ii) o th e r c o n d itio n s in a d d itio n to o r in
lieu o f th e foreg o in g m a y b e im p o se d b y
th e a p p ro p ria te F e d e ra l su p e rv iso ry
a g e n c y o r a g e n c ie s in a n y sp ec ific c ase.
(4) Organization sponsoring credit
union. A m a n a g e m e n t o fficial o f a
d e p o sito ry o rg a n iz a tio n o r its affiliate
m a y se rv e a t th e sa m e tim e a s a
m a n a g e m e n t o fficial o f a F e d e ra lly in s u re d c re d it u n io n th a t is sp o n so re d
b y th e d e p o sito ry o rg a n iz a tio n o r its
a ffiliate p rim a rily to se rv e e m p lo y e e s of
th e d e p o sito ry o rg a n iz a tio n .
(5) Loss ofmanagement officialsdue
tochanges in circumstances. If a
d e p o sito ry o rg a n iz a tio n e x p e rie n c e s a
c h a n g e in c irc u m s ta n c e s d e s c rib e d in
p a ra g r a p h s (a)(1), (b)(1), o r (b)(2) of
§ 212.6, a n d th e c h a n g e re q u ire s th e
te rm in a tio n o f se rv ic e a t th e d e p o sito ry
o rg a n iz a tio n o f 50 p e r c e n t o r m o re of
th e o rg a n iz a tio n ’s d ire c to rs o r o f 50 p e r
c e n t o r m o re o f th e to ta l m a n a g e m e n t
o fficials o f th e d e p o sito ry o rg a n iz a tio n ,
s u c h m a n a g e m e n t o fficials m a y c o n tin u e
to s e rv e in e x c e s s o f th e tim e p e rio d s
Federal Register / Vol. 45, No. 70 / Wednesday, April 9, 1980 / Rules and Regulations
p ro v id e d in p a ra g r a p h s (a)(2), (b)(1), a n d
(b)(2) o f § 212.6: Provided, T h a t: (i) T h e
a p p ro p ria te F e d e ra l su p e rv iso ry a g en c y
o r ag e n c ie s d e te rm in e s th a t th e se rv ic e
b y su c h m a n a g e m e n t o fficials is
n e c e s s a ry to p ro v id e m a n a g e m e n t o r
o p e ra tin g e x p e rtise ; (ii) e a c h
m a n a g e m e n t o fficial so a ffe c te d a g re e s
to s e v e r th e p ro h ib ite d in te rlo c k in g
re la tio n sh ip n o la te r th a n 30 m o n th s
a fte r th e c h a n g e in c irc u m sta n c e s; (iii)
th e d e p o sito ry o rg a n iz a tio n su b m its a
p ro p o s a l fo r d ie o rd e rly te rm in a tio n o f
se rv ic e b y su c h m a n a g e m e n t officials
o v e r th e tim e p e rio d p ro v id ed ; a n d (iv)
o th e r c o n d itio n s in a d d itio n to o r in lieu
o f th e foregoing m a y b e im p o se d b y th e
a p p ro p ria te F e d e ra l su p e rv iso ry a g e n cy
o r a g e n c ie s in a n y sp ecific ca se .
§ 212.5 Grandfathered Interlocking
Relationships.
A p e rs o n w h o se in terlo c k in g se rv ic e
in a p o sitio n a s a m a n a g e m e n t official o f
tw o o r m o re d e p o sito ry o rg a n iz a tio n s
b e g a n p rio r to N o v e m b e r 10,1978, a n d
w a s n o t im m e d ia te ly p rio r to th a t d a te
in v io la tio n o f se c tio n 8 o f th e C la y to n
A c t (15 U.S.C. 19) is n o t p ro h ib ite d from
c o n tin u in g to se rv e in su c h in te rlo ck in g
p o sitio n s u n til N o v e m b e r 10,1988,
e x c e p t a s p ro v id e d in § 212.6(a).
§ 212.6 Changes In circumstances.
(a)(1) Grandfatheredinterlocks. If a
p e rs o n 's se rv ice a s a m a n a g e m e n t
o fficial is g ra n d fa th e re d u n d e r § 212.5
th e p e rs o n m u st te rm in a te su c h se rv ic e
if th e se rv ic e b ec o m e s p ro h ib ite d b y th e
o c c u rre n c e o f a n y o f th e follo w in g
c h a n g e s in c irc u m sta n c es:
(1)Acquisitions, mergers, and
consolidations. O n e o f th e d e p o sito ry
o rg a n iz a tio n s in v o lv e d in th e
in te rlo ck in g re la tio n sh ip a c q u ire s o r is
a c q u ire d by , is m e rg ed in to o r w ith , o r is
c o n s o lid a te d w ith a n o th e r d e p o sito ry
o rg a n iz a tio n fo r w h ic h p rio r to th e
tr a n s a c tio n th e p e rs o n c o u ld n o t h a v e
se rv e d a s a m a n a g e m e n t official u n d e r
§ 212.3; or
(ii) Branching. O n e o f th e d e p o sito ry
o rg a n iz a tio n s in v o lv e d in th e
g ra n d fa th e re d in terlo ck in g re la tio n sh ip ,
o r its d e p o sito ry in s titu tio n affiliate,
e s ta b lis h e s a n in itia l office in th e s a m e
c o m m u n ity a s th e o th e r d e p o sito ry
o rg a n iz a tio n , o r its d e p o sito ry in s titu tio n
a ffiliate, o r b o th o f th e d e p o sito ry
o rg a n iz a tio n s, o r th e ir d e p o sito ry
in s titu tio n affiliate s, e s ta b lis h o ffices in
a c o m m u n ity o r S M S A w h e re n e ith e r
p re v io u sly h a d a n office.
(2) Grace period. If a p e rs o n ’s
g ra n d fa th e re d se rv ic e b e c o m e s
p ro h ib ite d u n d e r p a ra g r a p h (a)(1) o f th is
sec tio n , I h e p e rs o n m a y c o n tin u e to
se rv e a s a m a n a g e m e n t official o f a ll
o rg a n iz a tio n s in v o lv e d in th e p ro h ib ite d
in terlo ck in g re la tio n sh ip th ro u g h th e
d a te o f th e n e x t re g u la rly s c h e d u le d
a n n u a l s h a re h o ld e rs ’ m e e tin g o f a n y o f
th e o rg a n iz a tio n s in v o lv ed , w h ic h e v e r
o ccu rs la st, u n le ss th e a p p ro p ria te
F e d e ra l su p e rv iso ry a g e n c y o r a g e n c ie s
ta k e a ffirm a tiv e a c tio n in a n in d iv id u a l
c a s e to e s ta b lis h a s h o rte r p e rio d .
H o w ev e r, th e p e rs o n m a y re q u e s t th e
a p p ro p ria te a g en cy o r a g e n c ie s to g ra n t
a n a d d itio n a l e x te n s io n o f tim e to
c o n tin u e th e in te rlo ck in g re la tio n sh ip ,
b u t th e p ro h ib ite d in te rlo ck in g
re la tio n s h ip m a y n o t c o n tin u e fo r m o re
th a n 15 m o n th s from th e d a te o f th e
c h an g e in c irc u m s ta n c e s. If th e c h a n g e
in c irc u m s ta n c e s o c c u rre d p rio r to M a y
9.1980, th e c h a n g e w ill.b e c o n sid e re d to
h a v e o c c u rre d o n M a y 9,1980, for
p u rp o s e s o f th is p a ra g ra p h .
(b)(1) Non-grandfatheredinterlocks;
involuntarychanges;graceperiod. If a
p e rs o n ’s se rv ic e a s a m a n a g e m e n t
o fficial is n o t g ra n d fa th e re d u n d e r
§ 212.5 a n d b e c o m e s p ro h ib ite d a s a
re s u lt o f a n in c re a s e in th e a s s e t siz e of
a n o rg a n iz a tio n d u e to n a tu r a l g ro w th ,
o r a s a re s u lt o f a c h a n g e in S M S A o r
c o m m u n ity b o u n d a rie s o r th e
d e sig n a tio n o f a n e w S M S A th e p e rs o n
h a s 15 m o n th s fro m th e d a te o f th e
c h a n g e in c irc u m s ta n c e s to co m p ly w ith
th is p a rt, u n le s s th e a p p ro p ria te F e d e ra l
su p e rv iso ry a g e n c y o r a g e n c ie s ta k e
a ffirm a tiv e a c tio n in a n in d iv id u a l c a s e
to e s ta b lis h a s h o r te r p e rio d . If th e
c h a n g e in c irc u m s ta n c e s o c c u rre d p rio r
to M a y 9 ,1980, th e c h a n g e w ill b e
c o n s id e re d to h a v e o c c u rre d o n M a y 9,
1980 fo r p u rp o s e s o f th is su b p a ra g ra p h .
(2)
Non-grandfatheredinterlocks;
voluntarychanges;graceperiod. If a
p e rs o n ’s se rv ic e a s a m a n a g e m e n t
o fficial is n o t g ra n d fa th e re d u n d e r
§ 212.5 a n d b e c o m e s p ro h ib ite d a s a
re s u lt o f a n a c q u isitio n , m erg er,
c o n so lid a tio n , o r th e e s ta b lis h m e n t o f a n
office, th e p e rs o n m a y c o n tin u e to se rv e
a s a m a n a g e m e n t o fficial o f a ll
o rg a n iz a tio n s in v o lv e d in th e p ro h ib ite d
in te rlo c k th ro u g h th e d a te o f th e n e x t
re g u la rly sc h e d u le d a n n u a l
s h a r e h o ld e rs ’ m e etin g o f a n y o f th e
o rg a n iz a tio n s in v o lv ed , w h ic h e v e r
o c cu rs la s t, u n le s s th e a p p ro p ria te
F e d e ra l su p e rv iso ry a g e n c y o r ag e n c ie s
ta k e a ffirm a tiv e a c tio n in a n in d iv id u a l
c a s e to e s ta b lis h a sh o rte r p erio d .
H o w e v e r, th e p e rs o n m a y re q u e s t th e
a p p ro p ria te a g e n c y o r a g e n c ie s to g ra n t
a n a d d itio n a l e x te n s io n o f tim e to
co n tin u e th e in te rlo ck in g re la tio n sh ip ,
b u t th e p ro h ib ite d in terlo c k in g
re la tio n s h ip m a y n o t c o n tin u e fo r m o re
th a n 15 m o n th s fro m th e d a te o f th e
c h a n g e in c irc u m s ta n c e s. If th e c h a n g e
in c irc u m s ta n c e s o c c u rre d p rio r to M a y
9.1980, th e c h a n g e w ill b e c o n s id e re d to
24391
h a v e o c c u rre d o n M a y 9 ,1 9 8 0 fo r
p u rp o s e s o f th is p a ra g ra p h .
§ 212.7 Effect of Interlocks Act on Clayton
A ct
T h e B o a rd o f G o v e rn o rs o f th e F e d e ra l
R e se rv e S y ste m re g a rd s th e p ro v isio n s
o f th e first th re e p a ra g r a p h s o f se c tio n 8
o f th e C la y to n A c t (15 U .S.C. 19) to h a v e
b e e n s u p p la n te d b y th e re v is e d a n d
m o re c o m p re h e n siv e p ro h ib itio n s o n
m a n a g e m e n t official in te rlo c k s b e tw e e n
d e p o sito ry o rg a n iz a tio n s in th e
In te rlo c k s A ct.
§ 212.8 Enforcement
T h e B o a rd o f G o v e rn o rs o f th e F e d e ra l
R e se rv e S y ste m a d m in is te rs a n d
e n fo rc e s th e In te rlo c k s A c t w ith re s p e c t
to S ta te m e m b e r b a n k s , b a n k h o ld in g
c o m p a n ie s, a n d th e ir affiliate s, a n d m a y
re fe r th e c a s e o f a p ro h ib ite d
in terlo c k in g re la tio n s h ip in v o lv in g a n y
su c h o rg a n iz a tio n , re g a rd le s s o f th e
n a tu re o f a n y o th e r o rg a n iz a tio n
in v o lv e d in th e p ro h ib ite d re la tio n sh ip ,
to th e A tto rn e y G e n e ra l o f th e U n ite d
S ta te s to e n fo rce co m p lia n c e w ith th e
In te rlo c k s A c t a n d th is p a rt. If a n
a ffilia te o f a S ta te m e m b e r b a n k o r b a n k
h o ld in g c o m p a n y is p rim a rily su b je c t to
th e re g u la tio n o f a n o th e r F e d e ra l
su p e rv iso ry a g en cy , th e n th e B o a rd d o e s
n o t a d m in is te r a n d e n fo rc e th e
In te rlo c k s A c t w ith re s p e c t to th a t
a ffiliate.
Board of Governors of theFederal Reserve
System, April 3,1980.
Griffith L. G arw ood,
Deputy Secretary o f the Board.
FEDERAL RESERVE SYSTEM
12 CFR Part 265
[Docket No. R-0285]
Reserve Bank Authority to Extend
Grace Period Under Regulation L
AGENCY: Board of Governors ofthe
Federal Reserve System.
ACTION: Final rule.
The Board is amending its
Rules Regarding Delegation ofAuthority
in order to delegate to the Reserve
Banks the authority to grant an
additional grace period for the
termination ofmanagement official
interlocks that become prohibited as a
result of certain changes in
circumstances as provided in the
Board’s regulations (12 CFR Part 212)
issued under the Depository institution
Management Interlocks Act (12 U.S.C.
su m m a r y :
§ 3201 e t seq.). T h is a c tio n is in te n d e d to
e x p e d ite re v ie w s o f re q u e s ts fo r a n
e x te n d e d g ra c e p e rio d p ro v id e d in th e
reg u la tio n s.
EFFECTIVE DATE: M a y 9, 1980.
FOR FURTHER INFORMATION CONTACT:
Bronwen Mason, Senior Attorney (202
452-3564), or Melanie Fein, Attorney
(202-452-3594), Legal Division, Board of
Governors of the Federal Reserve
System, Washington, D.C. 20551.
SUPPLEMENTARY INFORMATION: The
Depository Institution Management
Interlocks Act ("Interlocks Act”)
authorizes the Board of Governors to
provide up to 15 months for the
termination of management interlocks
between depository organizations that
become prohibited as a result of certain
changes in circumstances. The Board
has issued regulations (12 CFR 212.6)
under the Interlocks Act that require the
termination ofmanagement interlocks in
certain instances aftermergers,
a c q u isitio n s, c o n so lid a tio n s, o r th e
e s ta b lis h m e n t o f b ra n c h o ffices. In m o st
c a se s , § 212.6 re q u ire s th a t th e a ffe c te d
in te rlo c k b e te rm in a te d n o la te r th a n th e
n e x t re g u la rly sc h e d u le d a n n u a l m eetin g
o f sh a re h o ld e rs o f th e o rg a n iz a tio n s
in v o lv ed , u n le ss th e a p p ro p ria te
s u p e rv iso ry a g e n c y u p o n re q u e s t g ra n ts
a n a d d itio n a l g ra c e p e rio d o f u p to 15
m o n th s from th e d a te o f th e c h a n g e in
c irc u m sta n c e s. T h e a d d itio n a l g ra c e
p e rio d m a y b e m a d e a v a ila b le to a v o id
u n d u e d isru p tio n o f th e a n n u a l
sh a re h o ld e rs ’ m e etin g s o f th e d e p o sito ry
o rg a n iz a tio n s in v o lv ed , p a rtic u la rly
th o s e th a t a re w e ll alo n g in th e ir
p re p a r a tio n s fo r a n n u a l m e etin g s a n d
w h ic h m a y h a v e a lre a d y s e n t o u t
m a te ria ls to sh a re h o ld e rs n o m in a tin g
d ire c to rs w h o se se rv ic e w o u ld b e co m e
p ro h ib ite d a s a re s u lt o f th e is s u a n c e o f
th e reg u la tio n s. In o rd e r to e x p e d ite
re v ie w o f re q u e s ts fo r th e e x te n d e d
g ra c e perio d, th e B o a rd is d eleg atin g to
th e F e d e ra l R e se rv e B an ks th e a u th o rity
to g ra n t su ch re q u e s ts, w h e re
a p p ro p ria te , re c e iv e d from d e p o sito ry
o rg a n iz a tio n s in th e ir d istric ts.
T h e p ro v isio n s o f s e c tio n 553 o f T itle
5, U n ite d S ta te s C ode, re la tin g to n o tice,
p u b lic p a rtic ip a tio n , a n d d e fe rre d
e ffec tiv e d a te h a v e n o t b e e n fo llo w ed in
c o n n e c tio n w ith th e a d o p tio n o f th e se
a m e n d m e n ts b e c a u s e th e ch an g es
in v o lv e d a re p ro c e d u ra l in n a tu re a n d
d o n o t c o n stitu te a s u b s ta n tiv e ru le
su b je c t to th e re q u ire m e n ts o f th a t
sectio n .
In o rd e r to im p le m en t th is ac tio n , 12
CFR 265.2(f) is a m e n d e d b y ad d in g
p a ra g ra p h (f)(48) to re a d a s follow s:
§ 265.2 Specific Functions Delegated to
Board Employees and to Federal Reserve
Banks.
*
*
*
*
*
(f)
E ach F e d e ra l R ese rv e B an k is
a u th o riz e d a s to a m e m b e r b a n k o r o th e r
in d ic a te d o rg a n iz a tio n fo r w h ic h th e
R ese rv e B an k is re s p o n sib le for
re c eiv in g a p p lic a tio n s o r re g istra tio n
sta te m e n ts ; a s to its o fficers u n d e r
s u b p a ra g ra p h (23) o f th is p a ra g ra p h ; a n d
a s to its o w n fac ilities u n d e r
s u b p a ra g ra p h (26) o f th is p a ra g ra p h :
*
*
*
*
*
(48) U n d e r th e p ro v isio n s o f § 212.6 o f
th is c h a p te r (R eg u latio n L re la tin g to
c h a n g e s in c irc u m s ta n c e s req u irin g
te rm in a tio n o f in te rlo ck in g m a n a g e m e n t
o fficial re la tio n sh ip s), to g ra n t tim e for
c o m p lia n c e w ith § 212 o f u p to a n
a g g re g ate o f 15 m o n th s from th e d a te on
w h ic h th e c h a n g e in c irc u m s ta n c e s a s
sp e c ifie d in th a t se c tio n o ccu rs, if th e
g ra n tin g o f th e a d d itio n a l tim e a p p e a rs
to b e a p p ro p ria te to a v o id u n d u e
d is ru p tio n o f th e a n n u a l sh a re h o ld e rs '
m e e tin g s o f th e d e p o sito ry o rg a n iz a tio n s
in v o lv e d in th e m a n a g e m e n t in terlo c k s.
Board of Governors of the Federal Reserve
System, April 3,1980.
Theodore E.Allison,
SecretaryoftheBoard.
(FR Doc. 80-11029 F iled 4-8-80; 8:45 am)
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