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F ederal R eserve Bank of Dallas ROBERT D. McTEER, JR. DALLAS, TE X A S P R E S ID E N T AN D C H IE F E X E C U T I V E O F F I C E R AugUSt 28 1998 75265-5906 Notice 98-80 TO: The Chief Executive Officer of each financial institution and others concerned in the Eleventh Federal Reserve District SUBJECT Request for Public Comment on Proposed Revisions to the Management Official Interlock Rules DETAILS The Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of Thrift Supervision have proposed to revise their rules regarding management interlocks. The proposal conforms the interlock rules to recent statutory changes, modernizes and clarifies the rules, and reduces unneces sary regulatory burdens where feasible, consistent with statutory requirements. The Board must receive comments by October 13, 1998. Please address comments to Jennifer J. Johnson, Secretary, Board of Governors of the Federal Reserve System, 20th Street and Constitution Avenue, N.W., Washington, DC 20551. All comments should refer to Docket No. R-1013. ATTACHMENT A copy of the Board’s notice as it appears on pages 43052-58, Vol. 63, No. 154 of the Federal Register dated August 11, 1998, is attached. MORE INFORMATION For more information, please contact Dianne Wetsel at (214) 922-6085. For additional copies of this Bank’s notice, contact the Public Affairs Department at (214) 922-5254. Sincerely yours, For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal Reserve Bank of Dallas: Dallas Office (800) 333-4460; El Paso Branch Intrastate (800) 592-1631, Interstate (800) 351-1012; Houston Branch Intrastate (800) 392-4162, Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) 43052 Federal Register/Vol. 63, No. 154/Tuesday, August 11, 1998/Proposed Rules DEPARTMENT OF THE TREASURY Office of the Comptroller of the Currency 12CFR Part 26 [Docket No. 98-09] RIN 1557-AB60 FEDERAL RESERVE BOARD 12CFR Part 212 [Docket No. R-1013] FEDERAL DEPOSIT INSURANCE CORPORATION 12CFR Part 348 RIN 3064-A C 08 DEPARTMENT OF THE TREASURY Office of Thrift Supervision 12CFR Part 563f [Docket No. 98-58] RIN 1550-AB07 Management Official Interlocks AGENCIES: Office of the Comptroller of the Currency, Treasury; Board of Governors of the Federal Reserve System; Federal Deposit Insurance Corporation; Office of Thrift Supervision, Treasury. ACTION: Joint notice of proposed rulemaking. The Office of the Comptroller of the Currency (OCC), Board of Governors of the Federal Reserve System (Board), Federal Deposit Insurance Corporation (FDIC), and Office of Thrift Supervision (OTS) (the Agencies) propose to revise their rules regarding m anagement interlocks. The proposal conforms the interlocks rules to recent statutory changes, m odernizes and clarifies the rules, and reduces unnecessary regulatory burdens w here feasible, consistent w ith statutory requirem ents. DATES: Comments m ust be received by October 13, 1998. ADDRESSES: Comments should be directed to: OCC: Office of the Comptroller of the Currency, Com m unications Division, 250 E Street, SW., W ashington, DC 20219, Attention: Docket No. 98-09. Comments w ill be available for public inspection and photocopying at the same location. In addition, comments m ay be sent by facsimile transm ission to FAX num ber (202) 874-5274 or by Internet mail to REGS.COMMENTS@OCC.TREAS.GOV. SUMMARY: Board: Jennifer J. Johnson, Secretary, Board of Governors of the Federal Reserve System, Docket No. R-1013, 20th Street and Constitution Avenue, NW., W ashington, DC 20551. Comments addressed to Ms. Johnson m ay also be delivered to the Board’s m ail room betw een 8:45 a.m. and 5:15 p.m., and to the security control room outside of those hours. Both the m ail room and control room are accessible from the courtyard entrance on 20th Street betw een Constitution Avenue and C Street, NW. Comments may be inspected in room M P-500 betw een 9:00 a.m. and 5:00 p.m., except as provided in 12 CFR 261.12 of the Board’s Rules Regarding Availability of Information, 12 CFR 261.12. FDIC: W ritten comm ents should be addressed to Robert E. Feldman, Executive Secretary, Attention: Comments/OES, Federal Deposit Insurance Corporation, 550 17th Street, NW, W ashington, DC 20429. Comments may be h an d delivered to the guard station at the rear of the 550 17th Street Building (located on F Street), on business days betw een 7:00 a.m. and 5:00 p.m. (Fax num ber: (202) 898-3838; Internet address: comments@fdic.gov). Comments m ay be inspected and photocopied in the FDIC Public Information Center, Room 100, 801 17th Street, NW, W ashington, DC, between 9:00 a.m. and 4:30 p.m. on business days. OTS: Manager, D issem ination Branch, Records M anagement and Information Policy, Office of Thrift Supervision, 1700 G Street, NW., W ashington, DC 20552, A ttention Docket No. 98-58. These subm issions may be handdelivered to 1700 G Street, NW., from 9:00 to 5:00 on business days; sent by facsimile transm ission to FAX num ber (202) 906-7755, or may be sent by em ail to: public.info@ots.treas.gov. Those commenting by e-mail should include their nam e and telephone number. Comments will be available for inspection at 1700 G Street, NW., from 9:00 until 4:00 on business days. FOR FURTHER INFORMATION CONTACT: OCC: Sue E. Auerbach, Senior Attorney, Bank Activities and Structure, (202) 874-5300; Emily R. McNaughton, National Bank Examiner, Senior Policy Analyst, Core Policy Development, (202) 874-5190; Jackie Durham, Bank Organization and Structure, Senior Licensing Policy Analyst, (202) 8745060; or Ursula Pfeil, Attorney, Legislative and Regulatory Activities, (202) 874-5090. Board: Thom as M. Corsi, Senior Counsel, (202) 452-3275, or M ichelle Q. Profit, Attorney, (202) 736-5599, Legal Division, Board of Governors of the Federal Reserve System. For the hearing im paired only, Telecom m unication Device for Deaf (TTD), Diane Jenkins, (202) 452-3544. FDIC: Curtis Vaughn, Examination Specialist, Division of Supervision, (202) 898-6759; John Jilovec, Exam ination Specialist, Division of Supervision, (202) 898-8958; or Mark Mellon, Counsel, Regulation and Legislation Section, Legal Division, (202) 898-3854. OTS: David Bristol, Senior Attorney, Business Transactions Division, Chief Counsel’s Office, (202) 906-6461; or Joseph M. Casey, Supervision Policy, (202) 906-5741. SUPPLEMENTARY INFORMATION: I. Background The Depository Institution M anagem ent Interlocks Act (12 U.S.C. 3201-3208) (the Interlocks Act or Act) generally prohibits bank m anagem ent officials from serving sim ultaneously w ith two unaffiliated depository institutions or their holding companies (depository organizations). The scope of the prohibition depends on the size and location of the organizations involved. For instance, the Act prohibits interlocks betw een unaffiliated depository organizations, regardless of size, if both organizations have an office 1 in the same com m unity (the com m unity prohibition). Interlocks are also prohibited betw een unaffiliated depository organizations if both organizations have total assets of $20 m illion or more and have offices in the same Relevant M etropolitan Statistical Area (RMS A) (the RMS A prohibition). The Interlocks Act also prohibits interlocks between unaffiliated depository organizations, regardless of location, if the organizations have total assets exceeding specified thresholds (the major assets prohibition). Section 2210 of the Economic Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPR Act) am ended sections 204, 206 and 209 of the Interlocks Act (12 U.S.C. 3203, 3205 and 3207). Section 2210(a) of the EGRPR Act am ended the Interlocks Act by changing the thresholds for the major assets prohibition u nder 12 U.S.C. 3203. Prior to the EGRPR Act, m anagem ent officials of depository organizations w ith total assets exceeding $1 billion were prohibited from serving as m anagem ent officials of unaffiliated depository organizations w ith assets exceeding $500 million, regardless of the location 1 Each of the Agencies’ regulations generally define “office” as a home or branch office. See 12 CFR 26.2, 212.2, 348.2, and 563f.2. Federal Register/Vol. 63, No. 154/Tuesday, August 11, 1998/Proposed Rules of the organizations.2 The EGRPR Act raised the thresholds to $2.5 billion and $1.5 billion, respectively. The revision also authorized the Agencies to adjust the thresholds by regulation, as necessary to allow for inflation or m arket conditions. Section 2210(b) of the EGRPR Act perm anently extended the grandfather exem ptions found in 12 U.S.C. 3205(a) and (b). These exem ptions were due to expire in 1998. The EGRPR Act repealed section 3205(c), w hich m andated Agency review of grandfathered interlocks before M arch 1995. The EGRPR Act also am ended 12 U.S.C. 3207 to provide that the Agencies may adopt “regulations that perm it service by a management official that w ould otherwise be prohibited by [the Interlocks Act], if such service w ould not result in a m onopoly or substantial lessening of com petition.” This change repealed the specific “regulatory standards” and “management consignm ent” exem ptions added by the Riegle Comm unity Development and Regulatory Im provem ent Act of 1994 (CDRI A ct),3 and restored the Agencies’ broad authority to create regulatory exemptions to the statutory prohibitions on interlocks. II. Discussion of Proposed Regulations The proposal reflects these statutory changes. This proposal also renews an earlier proposal for a small market share exem ption th at the Board, OCC, and FDIC had advanced before enactm ent of the CDRI Act. The Agencies invite comments on all aspects of this proposal. A. D efinitions The Agencies’ current regulations define key term s im plem enting the Interlocks Act. A num ber of these definitions were added or revised in 1996 to im plem ent the CDRI Act.4 W ith the repeal of the specific exemptive standards in the CDRI Act, two of these definitions have become unnecessary and w ould be removed. A nticom petitive Effect The current rule defines “anticom petitive effect” as a “m onopoly or substantial lessening of com petition.” U nder the new statutory scheme, the 2The Agencies define “total assets” of diversified savings and loan holding companies and bank holding companies exempt from § 4 of the Bank Holding Company Act to include only the assets of their depository institution affiliates. See 12 CFR 26.2(r), 212.2(q), 348.2(q), and 563f.2(r). 3The Agencies adopted final regulations implementing the management interlocks provisions of the CDRI Act, effective October 1, 1996. See 61 FR 40293 (August 2,1996). 4 See 61 FR 40293 (August 2, 1996). substance of this definition is the sole criterion for gauging w hether to grant an exem ption u nder the A gencies’ general exemptive authority. Because the proposed regulations w ould em ploy this phrase in only one provision, a separate definition is unnecessary. Critical The current regulations use the term “critical” in connection w ith the Regulatory Standards exem ption created by the CDRI Act. Since the EGRPR Act elim inates the Regulatory Standards exem ption, a regulatory definition of “critical” is unnecessary. B. Major A ssets Prohibition Prior to the EGRPR Act, if a depository institution or depository holding com pany had total assets exceeding $1 billion, a management official of such institution or any affiliate thereof could not serve as a m anagem ent official of any other nonaffiliated depository institution or depository holding com pany having total assets exceeding $500 m illion or as a m anagement official of any affiliates of such other institution, regardless of location. The EGRPR Act revised the asset thresholds for the major assets prohibition from $1 billion and $500 m illion to $2.5 billion and $1.5 billion, respectively. The legislation also authorized the Agencies to adjust the threshold from tim e to tim e to reflect inflation or market changes. The proposal w ould am end the regulations to reflect the new threshold am ounts, and to add a m echanism providing for periodic adjustm ents of the thresholds. The adjustm ent w ould be based on changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (the Consum er Price Index). In those years w hen changes in the Consumer Price Index w ould change the thresholds by more than $100 m illion, the Agencies w ill provide appropriate notice of the change to depository institutions and depository institution holding companies. The Agencies invite com m ent on other types of m arket changes that m ay w arrant subsequent adjustm ents to the major assets prohibition. C. Regulatory Standards and M anagem ent Consignment Exem ptions The current regulations contain Regulatory Standards and M anagement Consignment exem ptions, w hich were predicated on section 3207 of the CDRI Act. The EGRPR Act rem oved the specific exem ptions from the Interlocks Act an d substituted a general authority for the Agencies to create exem ptions by regulation. Accordingly, the proposed 43053 rule w ould rem ove these regulatory exemptions. However, the rule proposed u n d er the am ended exemptive authority, discussed in the following section, includes rebuttable presum ptions that interlocks in certain circum stances w ould not result in a m onopoly or substantial lessening of competition. These presum ptions are based on criteria that the Agencies used before the passage of the CDRI Act, and w hich Congress em ployed in creating the M anagement Consignment exemption. D. General Exem ptive A uthority Section 2210(c) of the EGRPR Act authorizes the Agencies to adopt regulations perm itting service by a m anagem ent official that w ould otherwise be prohibited by the Interlocks Act, if such service w ould not result in “a m onopoly or substantial lessening of com petition.” To im plem ent this authority, the Agencies are proposing to exem pt otherwise prohibited m anagem ent interlocks w here the dual service w ould not result in a m onopoly or substantial lessening of com petition, and w ould not otherwise threaten safety and soundness. The process for obtaining such exem ptions w ill be set out in each Agency’s procedural regulations or, in the case of the OCC, in its Corporate Manual. Since 1979, w hen regulations im plem enting the Interlocks Act were first prom ulgated, the Agencies have recognized that interlocks involving certain classes of depository organizations present a reduced risk to com petition, and that, by enlarging the pool of m anagem ent available to such organizations, com petition could be enhanced. Thus, in the initial interlocks rules published in 1979, the Agencies reserved the authority to perm it interlocks to strengthen new ly chartered organizations, troubled organizations, organizations in low- or m oderateincom e areas, and organizations controlled or m anaged by m inorities or women. The authority to perm it interlocks in such circum stances was deem ed “necessary for the prom otion of com petition over the long term .” 5 Prior to the CDRI Act, these exem ptions were granted to m eet the need for qualified management. The Management Consignment exem ption u n d er the CDRI Act was generally available to the same four classes of organizations, b u t on a m ore lim ited basis. W ith the EGRPR A ct’s restoration of the broad exem ptive authority u n d er the Interlocks Act, the Agencies again have 5See 44 FR 42161, 42165 (July 19,1979). 43054 Federal Register/Vol. 63, No. 154/Tuesday, August 11, 1998/Proposed Rules broad authority to grant exem ptions that w ill not adversely affect competition. The Agencies believe that interlocks involving the four classes of organizations previously identified may provide managem ent expertise needed to enhance such organizations’ ability to compete. Accordingly, the Agencies propose to create a rebuttable presum ption that an interlock w ould not result in a m onopoly or substantial lessening of com petition, if: (1) The depository organization prim arily serves, low- or m oderate-incom e areas; (2) the depository organization is controlled or m anaged by members of a m inority group or women; (3) the depository institution has been chartered for less than 2 years; or (4) the depository organization is deem ed to be in “troubled condition” under regulations im plem enting section 914 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 1831i). These presum ptions w ould be applied in a m anner consistent w ith the Agencies’ past analysis of the factors to meet the legitimate needs of the institutions and organizations involved for qualified and skilled management. The presum ptions are designed to provide greater flexibility to classes of organizations that may have greater need for seasoned management. A claim th at factors exist giving rise to a presum ption does not preclude an Agency from denying a request for an exem ption if the Agency finds that the interlock nevertheless w ould result in a m onopoly or substantial lessening of com petition. The definitions of “area m edian incom e” and “low- and moderateincom e areas” added to the regulations in 1996 to im plem ent the CDRI Act am endm ents w ould be retained to provide guidance as to w hen an organization w ould qualify for one of the presum ptions. Interlocks that are based on a rebuttable presum ption w ould be allow ed to continue for three years, unless otherwise provided in the approval order. Nothing in the proposed rule w ould prevent an organization from applying for an extension of an interlock exem ption granted u nder a presum ption if the factors continued to apply. The organization w ould also be free to utilize any other exem ption that may be available. The Agencies propose that any interlock approved u n d er this section m ay continue so long as it w ould not result in a m onopoly or substantial lessening of competition, becomes unsafe or unsound, or is subject to a condition requiring term ination at a specific time. E. Sm all M arket Share Exem ption In 1994, the OCC, Board, and FDIC published notices of proposed rulemaking seeking com m ent on a proposed market share exem ption.6 The proposed exem ption w ould have been available for interlocks involving institutions that, on a com bined basis, w ould control less than 20 percent of the deposits in a com m unity or relevant MSA. These agencies published small market share exem ption proposals pursuant to the broad exemptive authority vested in the agencies prior to the CDRI Act. After the CDRI Act restricted the agencies’ broad authority, the OCC, Board and FDIC w ithdrew their proposals.7 The broad exemptive authority u nder the EGRPR Act provides authority for a small m arket share exemption. Accordingly, the OCC, Board and FDIC, joined by the OTS, are issuing this proposal for the small market share exemption. The exem ption is intended to enlarge the pool of management talent upon w hich depository institutions may draw, resulting in more competitive, better-managed institutions w ithout causing significant anticom petitive effects. The Interlocks Act, by discouraging com mon m anagement among financial institutions, seeks to prevent adverse effects on com petition in the provision of products and services that financial institutions offer. W here depository institutions dom inate a large portion of the market, these risks are significant. W hen a particular market is served by m any institutions, however, the risks dim inish that depository institutions w ith interlocking relationships can adversely affect the available products and services in their markets. The Agencies believe that the com bined share of the deposits of two institutions provides a meaningful assessm ent of the capacity of the two institutions to control credit and related services in their market. Accordingly, the Agencies propose to exempt interlocking service involving two unaffiliated depository organizations that together control no m ore than 20 percent of the deposits in any RMSA or com m unity in w hich the organizations have offices. Organizations claiming the exem ption w ould be required to determ ine the market share in each RMSA and com m unity in w hich both depository organizations (or their 6 See OCC, 59 FR 29740 (June 9,1994); Board, 59 FR 7909 (February 17, 1994); and FDIC, 59 FR 18764 (April 20, 1994). 7 See 60 FR 67424 (December 29,1995) for withdrawal by the OCC and the Board; and 60 FR 7139 (February 7,1995) for withdrawal by the FDIC. depository institution affiliates) have offices. The relevant m arket used for the sm all market share exception (i.e. the RMSAs or com m unities in w h ich both depository organizations or their depository institution affiliates have offices) are the same m arkets described in the com m unity and RMSA prohibitions. The small m arket share exem ption w ould not be available for interlocks subject to the major assets prohibition. The exemptions w ould continue to apply as long as the organizations meet the applicable conditions. Any event, such as expansion or a merger, that causes the level of deposits controlled to exceed 20 percent of deposits in any RMSA or com m unity w ould be considered to be a change in circumstances. Accordingly, the depository organizations w ould have 15 m onths (or such shorter period as directed by the appropriate Agency) to address the prohibited interlock by term ination or otherwise. Conforming changes relating to term ination have been m ade to the Agencies’ change of circum stances provisions. No prior Agency approval w ould be required in order to claim the proposed sm all market share exemption. M anagement is responsible for com pliance w ith the terms of the exem ption and for m aintaining sufficient supporting docum entation. To determ ine their eligibility for the exemptions, depository organizations w ould need to obtain appropriate deposit share data from the FDIC. This information is collected in the Summary of Deposits published by the FDIC and is available for institutions regulated by the Agencies on the Internet at h ttp :// www.fdic.gov. The most recently available deposit share data w ill be used to determ ine w hether organizations are entitled to the exemptions. Thus, the depository organization seeking the exem ption is entitled to rely u p o n the deposit share data that has been com piled for the previous year, until the next year’s data has been distributed. The Agencies request com m ents on all aspects of the proposed sm all market share exemption. In particular, the Agencies request com m ents regarding the following issues: 1. W hether 20 percent of the deposits in a com m unity or RMSA is an appropriate lim it for the application of the exemptions. 2. W hether deposit data collected by the FDIC in connection w ith the Report of Condition and Income should be used to determ ine eligibility for the exemptions, and w hether alternative Federal Register/Vol. 63, No. 154/Tuesday, August 11, 1998/Proposed Rules sources of inform ation concerning deposit share should be acceptable for determ ining availability of the exemptions. 3. W hether calculation of a depository organization’s eligibility for exem ption from the com m unity prohibition will create u n d u e burdens, and, if so, how the burdens could be reduced (for example, by basing the exem ption on the total asset size of the institutions involved). 4. W hether there is a significant risk that the purposes of the Interlocks Act w ould be evaded through “hub and spoke” arrangements. U nder these arrangements, directors of one depository organization w ould serve as directors of different unaffiliated organizations that have, in the aggregate, a deposit share in excess of the 20% limit. III. Paperwork Reduction Act The Agencies invite comm ent on: (1) W hether the proposed collection of inform ation contained in this notice of proposed rulemaking is necessary for the proper performance of each Agency’s functions, including w hether the inform ation has practical utility; (2) The accuracy of each Agency’s estimate of the b urden of the proposed inform ation collection; (3) Ways to enhance the quality, utility, and clarity of the information to be collected; (4) Ways to m inim ize the b urden of the inform ation collection on respondents, including the use of autom ated collection techniques or other forms of inform ation technology; and (5) Estimates of capital or start-up costs and costs of operation, m inutes, and purchase of services to provide information. Recordkeepers are not required to respond to this collection of inform ation unless it displays a currently valid OMB control number. OCC: The collection of inform ation requirem ents contained in this notice of proposed rulem aking have been subm itted to the Office of Management and Budget for review in accordance w ith the Paperw ork R eduction Act of 1995 (44 U.S.C. 3507(d)). Comments on the collections of inform ation should be sent to the Office of M anagement and Budget, Paperw ork Reduction Project (1557-0196), W ashington, DC 20503, w ith copies to the Legislative and Regulatory Activities Division (15570196), Office of the Comptroller of the Currency, 250 E Street, SW, W ashington, DC 20219. The collection of information requirem ents in this proposed rule are found in 12 CFR 26.4(h)(l)(i), 26.6(b), and 26.6(c). This inform ation is required to evidence com pliance w ith the requirem ents of the Interlocks Act by national banks and District banks. The likely respondents are national banks and District banks. E stim ated average annual burden hours p er respondent: 4 hours. E stim ated num ber o f respondents: 7. E stim ated total annual reporting burden: 29 hours. Start-up costs to respondents: None. Board: In accordance w ith section 3506 of the Paperw ork Reduction Act of 1995 (44 U.S.C. Ch. 35; 5 CFR 1320 A ppendix A .l), the Board review ed the proposed rule u nder the authority delegated to the Board by the Office of M anagem ent and Budget. Comments on the collections of inform ation should be sent to the Office of M anagement and Budget, Paperw ork R eduction Project (7100-0046, 7100-0134, 7100-0171, 7100-0266), W ashington, DC 20503, w ith copies of such comm ents to be sent to Mary M. McLaughlin, Chief, Financial Reports Section, Division of Research and Statistics, Mail Stop 97, Board of Governors of the Federal Reserve System, W ashington, DC 20551. The collection of inform ation requirem ents in this proposed rulem aking are found in 12 CFR 212.4(h)(l)(i), 212.6(b), and 212.6(c). This inform ation is required to evidence com pliance w ith the requirem ents of the Interlocks Act as am ended by section 338 of the CDRI Act. The respondents are state m em ber banks and subsidiary depository institutions of bank holding companies. E stim ated num ber o f respondents: 6 applicants per year. E stim ated average annual burden per respondent: 4 hours. E stim ated annual frequency o f reporting: Not applicable (one-time application). E stim ated total annual reporting burden: 24 hours. Start-up costs to respondents: None. No issues of confidentiality u nd er the provisions of the Freedom of Inform ation Act norm ally arise for the applications. FDIC: The collections of inform ation contained in this notice of proposed rulem aking have been subm itted to the Office of M anagement and Budget for review in accordance w ith the Paperw ork R eduction Act of 1995 (44 U.S.C.3507(d)). Comments on the collections of inform ation should be sent to the Office of M anagement and Budget, Paperw ork R eduction Project (3604-0118), W ashington, DC 20503, w ith copies of such comm ents to be sent to Steven F. Hanft, Office of the 43055 Executive Secretary, Federal Deposit Insurance Corporation, 550 17th Street, NW., W ashington, DC 20429. The collection of inform ation requirem ents in this proposed regulation are found in 12 CFR 348.4(i)(l)(i), 348.6(b), and 348.6(c). This inform ation is required to evidence com pliance w ith the requirem ents of the Interlocks Act. The likely respondents are insured nonm em ber banks. Estim ated num ber o f respondents: 5 applicants per year. Estim ated average annual burden per respondent: 4 hours. Estim ated annual frequency o f reporting: Not applicable (one-time application). E stim ated total annual reporting burden: 20 hours. OTS: The collection of inform ation requirem ents contained in this notice of proposed rulem aking have been subm itted to the Office of M anagement and Budget for review in accordance w ith the Paperw ork Reduction Act of 1995 (44 U.S.C. 3507(d)). Comments on the collection of inform ation should be sent to the Office of M anagem ent and Budget, Paperw ork R eduction Project (1550-0051), W ashington, DC 20503, w ith copies to the Office of Thrift Supervision, 1700 G Street, NW., W ashington, DC. The inform ation collection requirem ents in this proposed rule are found in 12 CFR 563f.4(h)(l)(i), 563f.6(b) and 563f.6(c). The OTS requires this inform ation as evidence of com pliance w ith the requirem ents of the Interlocks Act by savings associations. The likely respondents are savings associations. Estim ated annual frequency o f reporting: Not applicable (one-time application). E stim ated total annual reporting burden: 32 hours. E stim ated average annual hours per respondent: 4 hours. Estim ated num ber o f respondents: 8. Start-up costs to respondents: None. IV. Regulatory Flexibility Act Pursuant to section 605(b) of the Regulatory Flexibility Act (RFA) (5 U.S.C. 605(b)) the Agencies hereby certify that this proposed rule w ill not have a significant econom ic im pact on a substantial num ber of sm all entities. The Agencies expect that this proposal w ill not: (1) Have significant secondary or incidental effects on a substantial num ber of sm all entities; or (2) create any additional b u rden on sm all entities. The proposed regulations relax the criteria for obtaining an exem ption from the interlocks prohibitions, and specifically address the needs of small 43056 Federal Register/Vol. 63, No. 154/Tuesday, August 11, 1998/Proposed Rules entities by creating the sm all market share exemption. Accordingly, a regulatory flexibility analysis is not required. 3. Section 26.3 is am ended by revising paragraph (c) to read as follows: V. Executive Order 12866 (c) Major assets. A m anagement official of a depository organization w ith total assets exceeding $2.5 billion (or any affiliate of such an organization) m ay not serve at the same time as a m anagement official of an unaffiliated depository organization w ith total assets exceeding $1.5 billion (or any affiliate of such an organization), regardless of the location of the two depository organizations. The OCC w ill adjust these thresholds, as necessary, based on the year-to-year change in the average of the Consumer Price Index for the Urban Wage Earners and Clerical Workers, not seasonally adjusted, w ith rounding to the nearest $100 million. 4. Section 26.5 is revised to read as follows: The OCC and OTS have determ ined that this proposal is not a significant regulatory action u nder Executive Order 12866. VI. Unfunded Mandates Act o f 1995 The OCC and OTS have determ ined that the proposed rule w ill not result in expenditures by State, local, and tribal governments, or by the private sector, of more than $100 m illion in any one year. Accordingly, neither the OCC nor the OTS has prepared a budgetary im pact statem ent or specifically addressed the regulatory alternatives considered. List of Subjects 12 CFR Part 26 A ntitrust, Holding companies, M anagement official interlocks, National banks, Reporting and recordkeeping requirements. 12 CFR Part 212 A ntitrust, Banks, banking, Federal Reserve System, Holding companies, Management official interlocks, Reporting an d recordkeeping requirements. 12 CFR Part 348 A ntitrust, Banks, banking, Holding companies, Reporting and recordkeeping requirements. 12 CFR Part 563f A ntitrust, Holding com panies, Reporting and recordkeeping requirem ents, Savings associations. Office of the Comptroller o f the Currency 12 CFR Chapter I Authority and Issuance For the reasons set out in the joint preamble, the OCC proposes to am end chapter I of title 12 of the Code of Federal Regulations as follows: PART 26— MANAGEMENT OFFICIAL INTERLOCKS 1. The authority citation for part 26 continues to read as follows: Authority: 12 U.S.C. 93a and 3201-3208. §26.2 [Amended] 2. Section 26.2 is am ended by removing paragraphs (b) and (f) and redesignating paragraphs (c) through (s) as paragraphs (b) through (q), respectively. § 26.3 * * §26.5 Prohibitions. * * * Small market share exemption. (a) Exem ption. A m anagement interlock that is prohibited by § 26.3 is permissible, if: (1) The interlock is not prohibited by § 26.3(c); and (2) The depository organizations (and their depository institution affiliates) hold, in the aggregate, no m ore than 20 percent of the deposits in each RMSA or com m unity in w hich both depository organizations (or their depository institution affiliates) have offices. The am ount of deposits shall be determ ined by reference to the most recent annual Summary of Deposits published by the FDIC for the RMSA or community. (b) Confirmation and records. Each depository organization m ust m aintain records sufficient to support its determ ination of eligibility for the exem ption u nder paragraph (a) of this section, and m ust reconfirm that determ ination on an annual basis. 5. Section 26.6 is revised to read as follows: § 26.6 General exemption. (a) E xem ption. The OCC may, by order issued following receipt of an application, exem pt an interlock from the prohibitions in § 26.3, if the OCC finds that the interlock w ould not result in a m onopoly or substantial lessening of com petition, and w ould not present safety and soundness concerns. (b) Presumptions. In reviewing applications for an exem ption under this section, the OCC w ill apply a rebuttable presum ption that an interlock w ill not result in a m onopoly or substantial lessening of com petition if the depository organization seeking to add a m anagem ent official: (1) Prim arily serves low- and m oderate-incom e areas; (2) Is controlled or managed by persons w ho are members of a m inority group, or women; (3) Is a depository institution that has been chartered for less than two years; or (4) Is deem ed to be in “troubled co ndition” as defined in 12 CFR 5.51(c)(6). (c) Duration. Unless a specific expiration period is provided in the OCC approval, an exem ption perm itted by paragraph (a) of this section may continue so long as it w ould not result in a m onopoly or substantial lessening of com petition, or be unsafe or unsound. If the OCC grants an interlock exem ption in reliance upon a presum ption u n d er paragraph (b) of this section, the interlock may continue for three years, unless otherwise provided by the OCC in writing. 6. Section 26.7 is am ended by revising paragraph (a) to read as follows: §26.7 Change in circumstances. (a) Term ination. A management official shall term inate his or her service or apply for an exem ption if a change in circum stances causes the service to become prohibited. A change in circum stances may include an increase in asset size of an organization, a change in the delineation of the RMSA or com m unity, the establishm ent of an office, an increase in the aggregate deposits of the depository organization, or an acquisition, merger, consolidation, or any reorganization of the ow nership structure of a depository organization that causes a previously permissible interlock to become prohibited. * * * * * Dated: July 14,1998. Julie L. Williams, Acting Comptroller o f the Currency. Federal Reserve System 12 CFR Chapter II Authority and Issuance For the reasons set out in the joint pream ble, the Board proposes to am end chapter II of title 12 of the Code of Federal Regulations as follows: PART 21 2 — MANAGEMENT OFFICIAL INTERLOCKS 1. The authority citation for part 212 continues to read as follows: Authority: 12 U.S.C. 3201-3208; 15 U.S.C. 19. §212.2 [Amended] 2. Section 212.2 is am ended by removing paragraphs (b) and (f) and Federal Register/Vol. 63, No. 154/Tuesday, August 11, 1998/Proposed Rules redesignating paragraphs (c) through (r) as paragraphs (b) through (p), respectively. 3. Section 212.3 is am ended by revising paragraph (c) to read as follows: the depository organization seeking to add a m anagem ent official: (1) Prim arily serves low- and m oderate-incom e areas; (2) Is controlled or managed by persons w ho are members of a m inority §212.3 Prohibitions. group, or women; * * * * * (3) Is a depository institution that has (c) Major assets. A m anagement been chartered for less than two years; official of a depository organization or w ith total assets exceeding $2.5 billion (or any affiliate of such an organization) (4) Is deem ed to be in “troubled may not serve at the same tim e as a condition” as defined in 12 CFR 225.71. m anagem ent official of an unaffiliated (c) Duration. Unless a shorter depository organization w ith total assets expiration period is provided in the exceeding $1.5 billion (or any affiliate of Board approval, an exem ption perm itted such an organization), regardless of the by paragraph (a) of this section may location of the two depository continue so long as it w ould not result organizations. The Board w ill adjust in a m onopoly or substantial lessening these thresholds, as necessary, based on of com petition, or be unsafe or unsound. the year-to-year change in the average of If the Board grants an interlock the Consumer Price Index for the Urban exem ption in reliance upon a Wage Earners and Clerical Workers, not presum ption u nder paragraph (b) of this seasonally adjusted, w ith rounding to section, the interlock m ay continue for the nearest $100 million. three years, unless otherwise provided 4. Section 212.5 is revised to read as by the Board in writing. follows: 6. Section 212.7 is am ended by revising paragraph (a) to read as follows: § 212.5 Small market share exemption. (a) E xem ption. A management interlock that is prohibited by § 212.3 is perm issible, if: (1) The interlock is not prohibited by § 212.3(c); and (2) The depository organizations (and their depository institution affiliates) hold, in the aggregate, no more than 20 percent of the deposits in each RMSA or com m unity in w hich both depository organizations (or their depository institution affiliates) have offices. The am ount of deposits shall be determ ined by reference to the m ost recent annual Summary of Deposits published by the FDIC for the RMSA or community. (b) Confirmation and records. Each depository organization m ust m aintain records sufficient to support its determ ination of eligibility for the exem ption u nder paragraph (a) of this section, and m ust reconfirm that determ ination on an annual basis. 5. Section 212.6 is revised to read as follows: §212.6 General exemption. (a) Exem ption. The Board may, by agency order, exem pt an interlock from the prohibitions in § 212.3, if the Board finds that the interlock w ould not result in a m onopoly or substantial lessening of com petition, and w ould n ot present safety and soundness concerns. (b) Presum ptions. In reviewing applications for an exem ption under this section, the Board w ill apply a rebuttable presum ption that an interlock w ill not result in a m onopoly or substantial lessening of com petition if §212.7 Change in circumstances. (a) Termination. A management official shall term inate his or her service or apply for an exem ption if a change in circum stances causes the service to become prohibited. A change in circum stances may include an increase in asset size of an organization, a change in the delineation of the RMSA or com munity, the establishm ent of an office, an increase in the aggregate deposits of the depository organization, or an acquisition, merger, consolidation, or reorganization of the ow nership structure of a depository organization that causes a previously perm issible interlock to become prohibited. * * * * * By order of the Board of Governors of the Federal Reserve System, July 20, 1998. Jennifer J. Johnson, Secretary o f the Board. Federal Deposit Insurance Corporation 12 CFR Chapter III Authority and Issuance For the reasons set forth in the joint preamble, the Board of Directors of the FDIC proposes to am end chapter III of title 12 of the Code of Federal Regulations as follows: § 348.2 43057 [Amended] 2. Section 348.2 is am ended by removing paragraphs (b) and (f) and redesignating paragraphs (c) through (r) as paragraphs (b) through (p), respectively. 3. Section 348.3 is am ended by revising paragraph (c) to read as follows: §348.3 * Prohibitions. * * * * (c) Major assets. A m anagem ent official of a depository organization w ith total assets exceeding $2.5 billion (or any affiliate of such an organization) m ay not serve at the same tim e as a m anagem ent official of an unaffiliated depository organization w ith total assets exceeding $1.5 billion (or any affiliate of such an organization), regardless of the location of the two depository organizations. The FDIC w ill adjust these thresholds, as necessary, based on the year-to-year change in the average of the Consum er Price Index for the Urban Wage Earners and Clerical Workers, not seasonally adjusted, w ith rounding to the nearest $100 million. 4. Section 348.5 is revised to read as follows: §348.5 Small market share exemption. (a) Exem ption. A m anagem ent interlock th at is prohibited by § 348.3 is perm issible, if: (1) The interlock is not prohibited by § 348.3(c); and (2) The depository organizations (and their depository in stitution affiliates) hold, in the aggregate, no m ore than 20 percent of the deposits in each RMSA or com m unity in w hich both depository organizations (or their depository institution affiliates) have offices. The am ount of deposits shall be determ ined by reference to the m ost recent annual Summ ary of Deposits published by the FDIC for the RMSA or com munity. (b) Confirmation and records. Each depository organization m ust m aintain records sufficient to support its determ ination of eligibility for the exem ption u nder paragraph (a) of this section, and m ust reconfirm that determ ination on an annual basis. 5. Section 348.6 is revised to read as follows: § 348.6 General exemption. (a) Exem ption. The FDIC may, by agency order, exem pt an interlock from the prohibitions in § 348.3, if the FDIC finds that the interlock w ould not result PART 348— MANAGEMENT OFFICIAL in a m onopoly or substantial lessening INTERLOCKS of com petition, and w ould n ot present safety and soundness concerns. 1. The authority citation for part 348 (b) Presum ptions. In reviewing is revised to read as follows: applications for an exem ption under Authority: 12 U.S.C. 1823(k), 3207. this section, the FDIC w ill apply a 43 0 5 8 Federal Register/Vol. 63, No. 154/Tuesday, August 11, 1998/Proposed Rules rebuttable presum ption that an interlock w ill n ot result in a m onopoly or substantial lessening of com petition if the depository organization seeking to ad d a m anagem ent official: (1) Prim arily serves low- and m oderate-incom e areas; (2) Is controlled or m anaged by persons w ho are members of a m inority group, or women; (3) Is a depository institution that has been chartered for less than two years; or (4) Is deem ed to be in “troubled condition” as defined in § 303.101(c) of this chapter. (c) Duration. Unless a shorter expiration period is provided in the FDIC approval, an exem ption perm itted by paragraph (a) of this section may continue so long as it w ould not result in a m onopoly or substantial lessening of com petition, or be unsafe or unsound. If the FDIC grants an interlock exem ption in reliance upon a presum ption u nder paragraph (b) of this section, the interlock may continue for three years, unless otherwise provided by the FDIC in writing. 6. Section 348.7 is am ended by revising paragraph (a) to read as follows: §348.7 Change in circumstances. (a) Termination. A m anagem ent official shall term inate his or her service or apply for an exem ption if a change in circum stances causes the service to become prohibited. A change in circum stances may include an increase in asset size of an organization, a change in the delineation of the RMSA or com m unity, the establishm ent of an office, an increase in the aggregate deposits of the depository organization, or an acquisition, merger, consolidation, or reorganization of the ow nership structure of a depository organization that causes a previously perm issible interlock to become prohibited. * * * * * By order of the Board of Directors. Dated at W ashington, DC, this 18th day of May, 1998. Federal Deposit Insurance Corporation. Robert E. Feldman, Executive Secretary. Office of Thrift Supervision 12 CFR Chapter V Authority and Issuance For the reasons set out in the joint preamble, the OTS proposes to amend chapter V of title 12 of the Code of Federal Regulations as follows: finds that the interlock w ould not result in a m onopoly or substantial lessening of com petition, and w ould not present 1. The authority citation for part 563f safety and soundness concerns. A continues to read as follows: depository organization m ay apply to the OTS for an exem ption as provided Authority: 12 U.S.C. 3201-3208. by § 516.2 of this chapter. § 563f,2 [Amended] (b) Presum ptions. In reviewing 2. Section 563f.2 is am ended by applications for an exem ption under removing paragraphs (b) and (f) and this section, the OTS will apply a redesignating paragraphs (c) through (s) rebuttable presum ption that an interlock as paragraphs (b) through (q), w ill not result in a m onopoly or respectively. substantial lessening of com petition if 3. Section 563f.3 is am ended by the depository organization seeking to revising paragraph (c) to read as follows: add a m anagement official: (1) Prim arily serves low-and § 563f .3 Prohibitions. m oderate-incom e areas; * * * * * (2) Is controlled or m anaged by (c) Major assets. A m anagement persons who are members of a m inority official of a depository organization group, or women; w ith total assets exceeding $2.5 billion (3) Is a depository institution that or (or any affiliate of such an organization) has been chartered for less than two may not serve at the same time as a years; or m anagem ent official of an unaffiliated depository organization w ith total assets (4) Is deem ed to be in “troubled exceeding $1.5 billion (or any affiliate of cond itio n ” as defined in § 574.9(a)(5) of such an organization), regardless of the this chapter. location of the two depository (c) Duration. Unless a shorter organizations. The OTS w ill adjust these expiration period is provided in the thresholds, as necessary, based on the OTS approval, an exem ption perm itted year-to-year change in the average of the by paragraph (a) of this section may Consum er Price Index for the Urban continue so long as it w ould n ot result Wage Earners and Clerical Workers, not in a m onopoly or substantial lessening seasonally adjusted, w ith rounding to of com petition, or be unsafe or unsound. the nearest $100 million. If the OTS grants an interlock 4. Section 563f.5 is revised to read as exem ption in reliance upon a follows: presum ption u nder paragraph (b) of this section, the interlock may continue for § 563f.5 Small market share exemption. three years, unless otherwise provided (a) Exem ption. A management by the OTS in writing. interlock that is prohibited by § 563f.3 is 6. Section 563f.7 is am ended by perm issible, if: revising paragraph (a) to read as follows: (1) The interlock is not prohibited by § 563f.3(c); and § 563f.7 Change in circumstances. (2) The depository organizations (and (a) Termination. A management their depository institution affiliates) official shall term inate his or her service hold, in the aggregate, no more than 20 or apply for an exem ption if a change percent of the deposits in each RMSA or in circum stances causes the service to com m unity in w hich both depository become prohibited. A change in organizations (or their depository circum stances may include an increase institution affiliates) have offices. The in asset size of an organization, a change am ount of deposits shall be determ ined in the delineation of the RMSA or by reference to the most recent annual com m unity, the establishm ent of an Sum mary of Deposits published by the office, an increase in the aggregate FDIC for the RMSA or community. deposits of the depository organization, (b) Confirmation and records. Each or an acquisition, merger, consolidation, depository organization m ust m aintain or reorganization of the ow nership records sufficient to support its structure of a depository organization determ ination of eligibility for the th at causes a previously perm issible exem ption u nder paragraph (a) of this interlock to become prohibited. section, and m ust reconfirm that * * * * * determ ination on an annual basis. By the Office of Thrift Supervision. 5. Section 563f.6 is revised to read as Dated: May 27, 1998. follows: PART 563f— MANAGEMENT OFFICIAL INTERLOCKS Ellen Seidman, §563f.6 General exemption. (a) Exem ption. The OTS may, by agency order, exem pt an interlock from the prohibitions in § 563f.3, if the OTS Director.
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