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FEDERAL RESERVE BANK
OF NEW YORK
[
Circular No. 9581 ~J
November 15, 1983 J
M ANAG EM ENT O FFICIA L INTERLO CK S
Am endm ents to Regulation L
To A ll M e m b er b a n k s a n d B an k H o ld in g C o m p a n ie s ,
a n d O th ers C o n c e rn e d , in the S e c o n d F e d e ra l R e se r v e D istr ic t:
In our Circular No. 9556, dated September 26, 1983, the Board of Governors of the Federal Reserve System
announced the adoption of amendments to its Regulation L, “ Management Official Interlocks,” to implement the
Depository Institution Management Interlocks Act. In adopting the final amendments, the following statement was
issued by the Board of Governors:
The Federal Reserve Board has announced that the effective date of amendments to its Regulation L (Management
Official Interlocks) approved in August will be November 30, 1983.
Although the Board approved its amendments earlier, the effective date could not be set until the other federal regula
tors of depository institutions had approved corresponding changes in their regulations. The five federal regulators (Office
of the Comptroller of the Currency, Federal Reserve System, Federal Deposit Insurance Corporation, Federal Home Loan
Bank Board and National Credit Union Administration) have now published a joint set of amendments affecting manage
ment interlocks among depository organizations and establishing the effective date of the amendments. The joint rules do
not alter the amendments to Regulation L approved by the Board in August.
The amendments implement the Depository Institutions Management Interlocks Act, which generally, but with cer
tain exceptions, prohibits specified management official interlocks between depository institutions, depository holding
companies and their affiliates. The amendments simplify procedures for obtaining exceptions and extensions of time under
the Act, ease the burden of the Act on depository institution holding companies, broaden exclusions for certain manage
ment officials, broaden circumstances under which exemptions are available due to disruptive management loss, clarify
circumstances requiring termination of grandfathered interlocks and provide rules for termination of interlocks between
depository institutions and nondepository organizations that become diversified savings and loan holding companies (or
their subsidiaries).
Printed on the reverse side is the summary portion of the notice published in the F e d e ra l R e g iste r on November 1,
1983. The complete text of that notice, including a summary of comments received in connection with the proposal
to amend the regulation, a discussion of the specific provisions of the amendments, and a Regulatory Flexibility Act
analysis, will be furnished upon request directed to the Circulars Division of this Bank (Tel. No. 212-791-5216).
Enclosed — for member banks and others who maintain sets of the Board’s regulations — is the text of the
amendments to Regulation L, which has been reprinted from the F e d e ra l R e g is te r of November 1. Questions regard
ing the regulation may be directed to our Regulations Division (Tel. No. 212-791-5914).
A
nthony
M.
S olom on,
P r e s id e n t.
(OVER)
AGENCIES: Office of the Comptroller of the Currency/ Board of
Governors of the Federal Reserve System, Federal Deposit Insurance
Corporation, Federal Home Loan Bank Board, and National Credit
Union Administration.
ACTION:
Final rule.
SUMMARY: The Office of the Comptroller of the Currency, the
Board of Governors of the Federal Reserve System, the Federal
Deposit Insurance Corporation, the Federal Home Loan Bank
Board, and the National Credit Union Administration (collec
tively referred to as the "agencies") are amending their
regulations implementing the Depository Institution Management
Interlocks Act, which generally prohibit certain management
official interlocks between depository institutions, depository
holding companies, and their affiliates. These amendments will
(1) simplify the procedure for obtaining exceptions to the Act's
prohibitions and extensions of time to permit compliance with
the Act, (2) ease the burden of the Act on depository institution
holding companies by redefining the terms "office" and "total
assets," (3) broaden the exclusion for management officials
whose functions relate exclusively to retail merchandising and
manufacturing, (4) broaden the circumstances under which the
exception of the Act for disruptive management loss is available,
(5) clarify the circumstances that require termination of
nongrandfathered management official interlocks, and (6)
provide that interlocks between depository organizations and
nondepository organizations that become diversified savings
and loan holding companies, or their subsidiaries, need not be
terminated until November 10, 1988, despite the occurrence of
changes in circumstances. These amendments will streamline
procedures for administration of the Interlocks Act, and provide
the management of depository institutions and depository organi
zations with greater flexibility.
EFFECTIVE DATE: November 30, 1983.
FOR FURTHER INFORMATION CONTACT: Bronwen Mason Chaiffetz
((202) 452-3564) or Melanie Fein ((202) 452-3594), Board of
Governors of the Federal Reserve System; James F. E. Gillespie, Jr.
((202) 447-1893) or Rosemarie Oda ((202) 447-1880), Office of the
Comptroller of the Currency; Pamela E. F. LeCren or Barbara I.
Gersten ((202) 389-4171), Federal Deposit Insurance Corporation;
David J. Bristol ((202) 377-6461) or Cheryl A. Martin ((202)
377-6410) Federal Home Loan Bank Board; or Steven R. Bisker
((202) 357-1030), National Credit Union Administration.
SUPPLEMENTARY INFORMATION: On October 26, 1982, the agencies
published proposed amendments to the regulations (47 FR 47406)
implementing The Depository Institution Management Interlocks Act
of 1978 ("Interlocks Act") which was enacted as Title II of the
Financial Institutions Regulatory and Interest Rate Control Act
of L978 (Pub. L. No. 95-630, 12 USC § 3201 et seq.) The pro
posed amendments would implement provisions of Pub. L. No. 97-110
which was signed into law on December 26, 1981, streamline pro
cedures under existing regulations, and relieve certain regulatory
burdens. The proposed changes were designed to ease the current
regulatory burden while furthering the Interlocks Act's goal of
fostering competition among depository organizations.
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
M A N AG EM EN T OFFICIAL INTERLOCKS
AMENDMENTS TO REGULATION L
(effective N o v e m b e r 3 0 , 1983)
FEDERAL RESERVE SYSTEM
(1) "Total assets" means assets
measured on a consolidated basis as of
the close of the organization’s last fiscal
12 CFR Part 212
year. The “total assets" of a depository
holding company include the total assets
Management Official Interlocks
of all of its subsidiary affiliates, except
that “total assets” of a diversified
savings and loan holding company, as
12 CFR Part 212 is amended as
defined in section 408(a)(1)(F) of the
follows:
National Housing Act (12 U.S.C.
1730a(a)(F)),
or of a bank holding
PART 212—[AMENDED]
company that is exempt from the
prohibitions of section 4 of the Bank
1. The authority citation for Part 212
Holding Company Act of 1956 pursuant
reads as follows:
to an order issued under section 4(d) of
Authority: 12 U.S.C. 3201 et seq.
that Act (12 U.S.C. 1843(d)), means only
the total assets of its depository
2. Section 212.1(h), (i) and (1) are
institution affiliate. “Total assets" of a
revised as follows:
United States branch or agency of a
foreign commerical bank means the total
§212.2 Definitions.
assets of such branch or agency itself
*
*
*
*
*
exclusive of the assets of the other
(h) (1) “Management official" means (i) offices of the foreign commerical bank.
an employee or officer with
*
*
*
*
*
management functions (including a
3. Section 212.3(a) and paragraph (b)
branch manager): (ii) a director
introductory text, and paragraphs (b) (1)
(including an advisory director or
and (3) are revised to read as follows:
honorary director): (iii) a trustee of a
business organization under the control
§ 212.3 General Prohibitions.
of trustees (e.g., a mutual savings bank);
(a) Community. A management
or (iv) any person who has a
official of a depository organization
representative or nominee serving in
may not serve at the same time as a
any such capacity. (2) "Management
management official of another
official" does not include (i) a person
depository organization not affiliated
whose management functions relate
with it if:
exclusively to the business of retail
(1) Both are depository institutions
merchandising or manufacturing: (ii) a .
and each has an office in the same
person whose managment functions
community;
relate principally to the business outside
(2) Offices of depository institution
the United States of a foreign
affiliates of both are located in the same
commerical bank; or (iii) persons
community; or
described in the provisos of section
(3) One is a depository institution that
202(4) of the Interlocks Act (12 U.S.C.
has an office in the same community as
3201(4)).
a depository institution affiliate of the
(i) "Office" means a principal or
other.
branch office, located in the United
(b) Standard M etropolitan S tatistical
States, of a depository institution.
A rea ("SMSA ”). A management official
"Office" does not include a
of a depository organization may not
representative office of a foreign
serve at the same time as a management
commercial bank, an electronic
official of another depository
terminal, a loan production office, or
organization not affiliated with it if:
any office of a depository holding
(1) Both are depository institutions,
company.
each has an office in the same SMSA,
and either institution has total assets of
$20 million or more;
* * * * *
(3) One is a depository institution that
has an office in the same SMSA as a
depository affiliate of the other and
either the depository institution or the
depository institution affiliate has total
assets of $20 million or more.
4. Section 212.4 is amended by
revising paragraph (b) introductory text,
paragraphs (b)(1), (2), (3), and (5), and
paragraph (c) to read as follows:
§ 212.4 Perm itted interlocking
relationships.
*
*
*
*
*
(b) Interlocking relationships
perm itted b y agency order. A
management official or a prospective
management official of a state member
bank, bank holding company, or an
affiliate of either, may enter into an
otherwise prohibited interlocking
relationship with a depository
organization that falls within one of the
classifications enumerated in this
paragraph (b) if the Federal supervisory
agency (as specified in section 207 of the
Interlocks Act) of the organization that
falls within one of the classifications
determines that the relationship meets
the requirements set forth in this
paragraph. If the depository
organization that falls within one of the
classifications is not subject to the
interlocks regulations of any of the
Federal supervisory agencies, then the
Board shall determine whether the
relationship meets the requirements of
this paragraph.
(1) Organization in low income area;
m inority or women's organization. A
person may serve at the same time as a
management official of two or more
depository organizations (or affiliates
thereof) if one of the depository
organizations is (i) located, or to be
located, in a low income or other
economically depressed area, or (ii)
controlled or managed by persons who
are members of minority groups or by
women, subject to the following
PRINTED IN NEW YORK. FROM FEDERAL REGISTER. VOL. 48. NO. 212
For this Regulation to be complete, retain:
1) Regulation L, as amended effective May 9, 1980. printed in the pamphlet "Management Official Interlocks."
2) Amendments effective October 26, 1982 and February 7. 1983.
3) This slip sheet.
[Enc. Cir. No. 9581]
(OVER)
change in circumstances described in
§ 212.6 of this Part, the affected
management officials may continue to
serve in excess of the time periods
specified in § 212.6, provided that: (i)
The depository organization’s
prospective loss of management officials
or directors will be disruptive to the
internal management of the depository
organization; (ii) the depository
organization demonstrates that, absent
a grant of relief in accordance with this
paragraph, 30 percent or more of either
its directors or management officials are
likely to sever their interlocking
relationships with the depository
organization; (iii) if the prospective
losses of management officials resulted
from more than one change in
circumstances, such changes in
circumstances must have occurred
within a fifteen-month period; and (iv)
the depository organization develops a
plan for the orderly termination of
service by each such management
official over a period not longer than 30
months after the change in
circumstances which caused the
person’s service to become prohibited
(but if the loss of management officials
is the result of more than one change in
circumstances, the 30-month period is
measured from the first change in
circumstances). Other conditions in
addition to, or in lieu of, the foregoing
may be imposed by the appropriate
Federal supervisory agency. In
evaluating requests made pursuant to
this paragraph, the appropriate Federal
supervisory agency will presume that a
director who also is a paid, full-time
employee of the depository organization,
absent unusual circumstances, will not
resign from the position of director with
that depository organization. This
presumption may, however, be rebutted
by a showing that such unusual
circumstances exist.
*
*
*
*
*
(c)
D iversified savings an d loan
(5)
Loss o f managem ent officials due holding company. Notwithstanding
to changes in circum stances. If a
§ 212.3, a person who serves as a
depository organization is likely to lose
management official of a depository
30 percent or more of its directors or of
organization and of a nondepository
its total management officials due to a
organization (or any subsidiary thereof)
conditions: (A) The relationship is
necessary to provide management or
operating expertise to the organization
specified in paragraph (b)(1) (i) or (ii) of
this section; (B) no interlocking
relationship permitted by this paragraph
shall continue for more than five years;
and (C) other conditions in addition to,
or in lieu of, the foregoing may be
imposed by the appropriate Federal
supervisory agency in any specific case.
(2) N ew ly-chartered organization. A
person may serve at the same time as a
management official 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 relationship is
necessary to provide management or
operating expertise to the newlychartered organization; (ii) no
interlocking relationship permitted by
this paragraph shall continue for more
than two years after the newlychartered organization commences
business; and (iii) other conditions in
addition to, or in lieu of, the foregoing
may be imposed by the appropriate
Federal supervisory agency in any
specific case.
(3) Conditions endangering sa fety or
soundness. A person may serve at the
same time as a management official of
two or more depository organizations
(or affiliates thereof) if one of the
depository organizations faces
conditions endangering the
organization’s safety or soundness,
subject to the following conditions: (i)
The relationship is necessary to provide
management or operating expertise to
such organization facing conditions
endangering 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 in any specific case.
is not prohibited from continuing the
interlocking service when the
nondepository organization becomes a
diversified savings and loan holding
company as that term is defined in
section 408(a)(1)(F) of the National
Housing Act (12 U.S.C. 1730a(a)(l)(F)),
and may continue to serve until
November 10,1988, despite the
occurrence of any subsequent changes
in circumstances, whether or not those
changes in circumstances occurred prior
to November 30,1983.
5.
Section 212.8 is revised to read as
follows:
§212.6
Changes in circum stances.
(a) N ongrandfathered interlocks. If a
person’s service as a management
official is not grandfathered under
§ 212.5 of this part, the person’s service
must be terminated if a change in
circumstances causes such service to
become prohibited. Such a change may
include, but is not limited to, an increase
in asset size of an organization due to
natural growth, a change in SMSA or
community boundaries or the
designation of a new SMSA, an
acquisition, merger or consolidation, the
establishment of an office, or a
disaffiliation.
(b) Grace period. If a person’s
nongrandfathered service as a
management official becomes prohibited
under paragraph (a) of this section, the
person may continue to serve as a
management official of all organizations
involved in the prohibited interlocking
relationship until 15 months after the
date on which the change in
circumstances that caused the interlock
to become prohibited occurred, unless
the appropriate Federal supervisory
agency or agencies take affirmative
action in an individual case to establish
a shorter period.
By order of the Board of Governors of the
Federal Reserve System, effective October 21.
1983.
William W. Wiles,
Secretary of the Board.
@FedFRASER