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FEDERAL RESERVE BANK
OF NEW YORK
[
Circular No. 10602
December 15, 1992
"1
J
MANAGEMENT OFFICIAL INTERLOCKS
Clarification of Certain Filing
Requirements Under the Depository
Institution Management Interlocks Act
To A ll State Member Banks, and Bank Holding
Companies, in the Second Federal Reserve District:
Following is the text of a statement issued jointly by the four Federal financial
institutions regulatory agencies:*
The Federal financial institutions regulatory agencies have issued an interpreta
tion to clarify certain filing requirements under the agencies’ regulations implementing
the Depository Institution Management Interlocks Act (“Interlocks Act”).
The agencies are issuing the statement to remind institutions seeking a regulatory
exception from the prohibitions of the Interlocks Act that they need only obtain the
approval of the primary regulator of the institution seeking management or operating
expertise.
For the Federal Reserve System, the implementing regulation to which this
interpretation applies is Regulation L, “Management Official Interlocks.” Printed
on the following pages is the text of the interagency interpretation.
Questions regarding this matter may be directed, at this Bank, to Jay B.
Bernstein, Staff Director, Domestic Banking Applications Division (Tel. No.
212-720-5861).
E.
G
erald
C
o r r ig a n
,
President.
* The Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the
Federal Deposit Insurance Corporation, and the Office of Thrift Supervision.
T h e B o a r d of G o v e r n o r s of t h e F e d e r a l R e s e r v e System,
the Federal Deposit Insurance Corporation,
C o m p t r o l l e r of t h e Currency,
t h e O f f i c e of t h e
a n d th e O f f i c e of T h r i f t S u p e r v i s i o n
( c o l l e c t i v e l y "the a g e n c i e s ” ) a re i s s u i n g t h i s i n t e r p r e t a t i o n to
c l a r i f y c e r t a i n f i ling r e q u i r e m e n t s u n d e r t h e agencies'
regulations implementing the Depository Institution Management
Interlocks Act
("Interlocks Act " or " A c t " ) .
The Interlocks Act
prohibits management interlocks between unaffiliated depository
o r g a n i z a t i o n s w h e n the o r g a n i z a t i o n s h a v e o f f i c e s l o c a t e d in t he
s a m e c o m m u n i t y or m e t r o p o l i t a n s t a t i s t i c a l area,
or w h e n one of
t h e o r g a n i z a t i o n s has a s s e t s in e x c e s s of $500 m i l l i o n a n d t he
o t h e r o r g a n i z a t i o n has a s s e t s in e x c e s s of $1 billion.
T h e A c t a u t h o r i z e s t he a g e n c i e s to a d o p t r e g u l a t i o n s
m a k i n g a v a i l a b l e e x c e p t i o n s f r o m t h e s e r e s t r i c t i o n s for c e r t a i n
c a t e g o r i e s of d e p o s i t o r y institutions.
a g e n c i e s have,
by regulation,
U n d e r t h i s authority,
the
e s t a b l i s h e d e x c e p t i o n s f rom t h e
Act's prohibitions where the benefits that would result from the
i n c r e a s e d a v a i l a b i l i t y of m a n a g e r i a l e x p e r t i s e to c e r t a i n
i n s t i t u t i o n s a re e x p e c t e d to o u t w e i g h a n y a d v e r s e e f f e c t s on
compe t i t i o n .
In other words,
m a n a g e m e n t i n t e r l o c k s are e x c e p t e d
w h e r e t h e i n t e r l o c k is e x p e c t e d to s t r e n g t h e n a d e p o s i t o r y
o r g a n i z a t i o n or p e r h a p s e v e n a v o i d t he f a i l u r e of a d e p o s i t o r y
organization,
t h u s e n a b l i n g a v i a b l e i n s t i t u t i o n to c o n t i n u e to
p r o v i d e s e r v i c e s to its community.
T h e r e g u l a t o r y e x c e p t i o n s include:
u p to f ive y e a r s for d e p o s i t o r y o r g a n i z a t i o n s
i n come areas,
1) an e x c e p t i o n of
l o c a t e d in low-
a n d for m i n o r i t y an d w o m e n - o w n e d organi z a t i o n s ,
2
CIRCULAR
IMP.
I 0 ( j [ ) 2-
2) an e x c e p t i o n of u p t o t w o y e a r s for n e w l y - c h a r t e r e d
institutions,
3) an e x c e p t i o n for d e p o s i t o r y i n s t i t u t i o n s w h i c h
face c o n d i t i o n s t h a t e n d a n g e r s a f e t y a n d sou n d n e s s ,
a n d 4) an
e x c e p t i o n of u p t o t h i r t y m o n t h s for i n s t i t u t i o n s f a c i n g t h e loss
of 30 p e r c e n t or m o r e of t h e i r t o t a l n u m b e r of d i r e c t o r s or of
t h e i r t o t a l n u m b e r of m a n a g e m e n t o f f i c i a l s d u e t o c h a n g e s in
c i r c u m s t a n c e s t h a t c a u s e t h e directors'
or m a n a g e m e n t officials'
i n t e r l o c k i n g s e r v i c e t o b e c o m e proh i b i t e d .
Each exception
r e q u i r e s o n l y t h e p r i o r a p p r o v a l of t h e p r i m a r y s u p e r v i s o r y
a g e n c y for t h e
i n s t i t u t i o n w h i c h is e l i g i b l e for t h e exception.
T h e r e g u l a t o r y e x c e p t i o n s w i l l g e n e r a l l y be g r a n t e d if
it is d e t e r m i n e d :
1) t h a t t he i n s t i t u t i o n r e q u e s t i n g the
e x c e p t i o n f a l l s w i t h i n o ne of t he a b o v e cate g o r i e s ,
a nd 2) t hat
o
t he i n t e r l o c k i n g r e l a t i o n s h i p is n e c e s s a r y to p r o v i d e m a n a g e m e n t
or o p e r a t i n g e x p e r t i s e to t he i n s t i t u t i o n r e q u e s t i n g the
exception.
T o date,
i n s t i t u t i o n s in n e e d of m a n a g e m e n t or
o p e r a t i n g e x p e r t i s e w h o h a v e r e q u e s t e d r e g u l a t o r y e x c e p t i o n s from
t he m a n a g e m e n t i n t e r l o c k s p r o h i b i t i o n s h a v e on o c c a s i o n soug h t
a p p r o v a l for t h e s e e x c e p t i o n s n o t o n l y f r o m t h e i r p r i m a r y
r egulator,
b u t f r o m t h e p r i m a r y r e g u l a t o r of t h e i n s t i t u t i o n at
w h i c h t h e m a n a g e m e n t o f f i c i a l for w h o m t h e e x c e p t i o n is soug h t
c u r r e n t l y serves.
T he a d d e d r e v i e w is n o t required,
a n d such
r e v i e w d o e s n o t e n h a n c e to a s i g n i f i c a n t e x t e n t th e agencies'
a b i l i t y to e n f o r c e p r o v i s i o n s of th e I n t e r l o c k s Act.
3
It instead
,o * i
ttA ju c m o
only imposes an additional burden on institutions seeking
exceptions from the Act's prohibitions.
Accordingly, the agencies are issuing this statement to
remind institutions seeking a regulatory exception from the
prohibitions of the Interlocks Act that they need only obtain the
approval of the primary regulator of the institution in need of
management or operating expertise.
For example, in the case of a
management interlock between a newly-chartered institution and an
existing bank in the same community, approval would be required
only from the primary regulator for the newly-chartered bank.
After obtaining this approval, the institution should retain
copies of the approval letter in its files.
This statement does not affect the procedures that an
institution must follow when seeking an Interlocks Act exception
that is specifically provided for in the Act.
Board of Governors of the
Federal Reserve System
Federal Deposit Insurance
Corporation
Office of the Comptroller
of the Currency
Office of Thrift
Supervision
Dated:
November
12,
1992
4
FEDERAL RESERVE BANK
OF NEW YORK
[
Circular No. 10602
December 15, 1992
1
J
MANAGEMENT OFFICIAL INTERLOCKS
Clarification of Certain Filing
Requirements Under the Depository
Institution Management Interlocks Act
To All State Member Banks, and Bank Holding
Companies, in the Second Federal Reserve District:
Following is the text of a statement issued jointly by the four Federal financial
institutions regulatory agencies:*
The Federal financial institutions regulatory agencies have issued an interpreta
tion to clarify certain filing requirements under the agencies’ regulations implementing
the Depository Institution Management Interlocks Act (“Interlocks Act”).
The agencies are issuing the statement to remind institutions seeking a regulatory
exception from the prohibitions of the Interlocks Act that they need only obtain the
approval of the primary regulator of the institution seeking management or operating
expertise.
For the Federal Reserve System, the implementing regulation to which this
interpretation applies is Regulation L, “Management Official Interlocks.” Printed
on the following pages is the text of the interagency interpretation.
Questions regarding this matter may be directed, at this Bank, to Jay B.
Bernstein, Staff Director, Domestic Banking Applications Division (Tel. No.
212-720-5861).
E. G e r a l d C o r r ig a n ,
President.
*
The Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the
Federal Deposit Insurance Corporation, and the Office of Thrift Supervision.
T h e B o a r d of G o v e r n o r s of t h e F e d e r a l R e s e r v e System,
the Federal Deposit Insurance Corporation,
C o m p t r o l l e r of t h e Currency,
(c o l l e c t i v e l y "the agencies")
t h e O f f i c e of t he
a n d th e O f f i c e of T h r i f t S u p e r v i s i o n
a re i s s u i n g t h i s i n t e r p r e t a t i o n to
c l a r i f y c e r t a i n fili n g r e q u i r e m e n t s u n d e r t h e agencies'
regulations implementing the Depository Institution Management
Interlocks Act
("Interlocks A ct" or " A c t " ) .
The Interlocks Act
prohibits management interlocks between unaffiliated depository
o r g a n i z a t i o n s w h e n the o r g a n i z a t i o n s h a v e o f f i c e s l o c a t e d in t he
s a m e c o m m u n i t y or m e t r o p o l i t a n s t a t i s t i c a l area,
or w h e n one of
t h e o r g a n i z a t i o n s has a s s e t s in e x c e s s of $500 m i l l i o n a n d th e
o t h e r o r g a n i z a t i o n has a s s e t s in e x c e s s of $1 billion.
T h e A c t a u t h o r i z e s t h e a g e n c i e s to a d o p t r e g u l a t i o n s
m a k i n g a v a i l a b l e e x c e p t i o n s f r o m t h e s e r e s t r i c t i o n s for c e r t a i n
c a t e g o r i e s of d e p o s i t o r y institutions.
a g e n c i e s have,
by regulation,
U n d e r t h i s authority,
the
e s t a b l i s h e d e x c e p t i o n s f rom t he
A c t ' s p r o h i b i t i o n s w h e r e t he b e n e f i t s t h a t w o u l d r e s u l t f r o m t h e
i n c r e a s e d a v a i l a b i l i t y of m a n a g e r i a l e x p e r t i s e to c e r t a i n
i n s t i t u t i o n s a r e e x p e c t e d to o u t w e i g h a n y a d v e r s e e f f e c t s on
compe t i t i o n .
In other words,
m a n a g e m e n t i n t e r l o c k s are e x c e p t e d
w h e r e t h e i n t e r l o c k is e x p e c t e d to s t r e n g t h e n a d e p o s i t o r y
o r g a n i z a t i o n or p e r h a p s e v e n a v o i d t he f a i l u r e of a d e p o s i t o r y
organization,
thus enabling a viable
i n s t i t u t i o n to c o n t i n u e to
p r o v i d e s e r v i c e s to its community.
The regulatory exceptions
include:
u p to five y e a r s for d e p o s i t o r y o r g a n i z a t i o n s
i n come areas,
1) an e x c e p t i o n of
l o c a t e d in low-
a n d for m i n o r i t y and w o m e n - o w n e d organi z a t i o n s ,
2
2) an e x c e p t i o n of u p t o t w o y e a r s for n e w l y - c h a r t e r e d
institutions,
3) an e x c e p t i o n for d e p o s i t o r y i n s t i t u t i o n s w h i c h
face c o n d i t i o n s t h a t e n d a n g e r s a f e t y a n d soun d n e s s ,
a n d 4) an
e x c e p t i o n of u p t o t h i r t y m o n t h s for i n s t i t u t i o n s f a c i n g t h e loss
of 30 p e r c e n t or m o r e of t h e i r t o t a l n u m b e r of d i r e c t o r s or of
t h e i r t o t a l n u m b e r of m a n a g e m e n t o f f i c i a l s d u e t o c h a n g e s in
c i r c u m s t a n c e s t h a t c a u s e t h e directors'
or m a n a g e m e n t officials'
i n t e r l o c k i n g s e r v i c e t o b e c o m e p r o h ibited.
Each exception
r e q u i r e s o n l y t h e p r i o r a p p r o v a l of t h e p r i m a r y s u p e r v i s o r y
a g e n c y for t h e i n s t i t u t i o n w h i c h is e l i g i b l e fo r t h e exception.
T h e r e g u l a t o r y e x c e p t i o n s w i l l g e n e r a l l y be g r a n t e d if
it is d e t e r m i n e d :
1) t h a t t he i n s t i t u t i o n r e q u e s t i n g the
e x c e p t i o n f a l l s w i t h i n o ne of t he a b o v e cate g o r i e s ,
a nd 2) tha t
t he i n t e r l o c k i n g r e l a t i o n s h i p is n e c e s s a r y to p r o v i d e m a n a g e m e n t
or o p e r a t i n g e x p e r t i s e to t he i n s t i t u t i o n r e q u e s t i n g the
exception.
To date,
i n s t i t u t i o n s in n e e d of m a n a g e m e n t or
o p e r a t i n g e x p e r t i s e w h o h a v e r e q u e s t e d r e g u l a t o r y e x c e p t i o n s from
t he m a n a g e m e n t i n t e r l o c k s p r o h i b i t i o n s h a v e on o c c a s i o n s o ught
a p p r o v a l for t h e s e e x c e p t i o n s n o t o n l y f r o m t h e i r p r i m a r y
regulator,
b u t f r o m t he p r i m a r y r e g u l a t o r of t h e i n s t i t u t i o n at
w h i c h t h e m a n a g e m e n t o f f i c i a l for w h o m th e e x c e p t i o n is sought
c u r r e n t l y serves.
T he a d d e d r e v i e w is no t required,
a n d such
r e v i e w d o e s n o t e n h a n c e to a s i g n i f i c a n t e x t e n t t h e agencies'
a b i l i t y to e n f o r c e p r o v i s i o n s of t h e I n t e r l o c k s Act.
3
It instead
o n l y i m p o s e s a n a d d i t i o n a l b u r d e n on i n s t i t u t i o n s s e e k i n g
e x c e p t i o n s f r o m t h e A c t ' s prohi b i t i o n s .
Accordingly,
t h e a g e n c i e s a re i s s u i n g t h i s s t a t e m e n t to
remind institutions seeking a regulatory exception from the
p r o h i b i t i o n s of th e I n t e r l o c k s A c t t h a t t h e y n e e d o n l y o b t a i n t he
a p p r o v a l of t h e p r i m a r y r e g u l a t o r of t h e i n s t i t u t i o n in n e e d of
m a n a g e m e n t or o p e r a t i n g expertise.
F o r example,
in t h e c a s e of a
m a n a g e m e n t i n t e r l o c k b e t w e e n a n e w l y - c h a r t e r e d i n s t i t u t i o n a n d an
e x i s t i n g b a n k in the s a m e community,
a p p r o v a l w o u l d be r e q u i r e d
o n l y f r o m t h e p r i m a r y r e g u l a t o r for t h e n e w l y - c h a r t e r e d bank.
A f t e r o b t a i n i n g t his approval,
t he i n s t i t u t i o n s h o u l d r e t a i n
c o p i e s of t h e a p p r o v a l l e t t e r in its files.
T h i s s t a t e m e n t d o e s n o t a f f e c t t h e p r o c e d u r e s t h a t an
i n s t i t u t i o n m u s t f o l l o w w h e n s e e k i n g an I n t e r l o c k s A c t e x c e p t i o n
t h a t is s p e c i f i c a l l y p r o v i d e d for in t h e Act.
B o a r d of G o v e r n o r s of t he
Federal Reserve System
Federal Deposit Insurance
Corporation
O f f i c e of t he C o m p t r o l l e r
of t h e C u r r e n c y
O f f i c e of T h r i f t
Supervision
Dated:
November
12,
1992
4
@FedFRASER