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FEDERAL RESERVE BANK
OF NEW YORK
November 1, 1982
INTERLOCKING BANK RELATIONSHIPS
To All State Member Banks and Bank Holding Companies
in the Second Federal Reserve District:
The Board of Governors of the Federal Reserve System has amended, effective October 26,
1982, its Regulation L (Management Official Interlocks) in order to reflect certain recent changes in
the Depository Institution Management Interlocks Act. In addition, the Board has also announced
two proposed amendments to that regulation.
The following is quoted from the text of a statement issued by the Board of Governors:
The Interlocks Act prohibits certain interlocking relationships among officials of financial
institutions, including depository holding companies and their affiliates.
The amendment permits—under a grandfather clause of the Act—a management official to continue
in an interlocking relationship for the entire 10-year grandfathered period provided by the Act, despite
certain changes in circumstances, such as a merger of an institution involved in an interlock. The
amendment also permits a management official serving both a depository and a nondepository institution
to continue in both positions although the nondepository institution becomes a savings and loan holding
company.
At the same time, the Federal Reserve proposed changes in Regulation L that would:
(1) Simplify procedures for obtaining exceptions to the Act and extensions of time to permit
compliance with the Act;
(2) Ease the burden of the Act on depository institution holding companies by redefining certain
terms;
(3) Entirely exclude from the prohibitions of the Act management officials whose functions relate
exclusively to retail merchandising and manufacturing;
(4) Broaden the circumstances under which the exception to the prohibitions of the Act is available
on grounds of disruptive management loss, and
(5) Clarify the circumstances that require termination of nongrandfathered management official
interlocks.
The five Federal financial institutions regulators (Comptroller of the Currency, Federal Deposit
Insurance Corporation, Federal Home Loan Bank Board, Federal Reserve Board and the National Credit
Union Administration) have prepared a joint Federal Register notice of revisions and proposed revisions
in their regulations implementing the Depository Institution Management Interlocks Act.
Enclosed is an advance copy of the proposed and final amendments. The final amendment, in
slip sheet form, will be sent to you shortly. The five Federal financial institutions regulators
requested that comments regarding the Regulation L proposals be sent to the Comptroller of the
Currency. Comments may also be directed to our Consumer Affairs and Bank Regulations
Department.
A nthony M. S olomon ,
President.
t
Federal Reserve System
[12 C.F.R. Part 212]
Department o f the Treasury
Comptroller o f the Currency
[12 C.F.R. Part 26]
Federal Deposit Insurance Corporation
[12 C.F.R. Part 348]
Federal Home Loan Bank Board
[12 C.F.R. Part 563f]
National Credit Union Administration
[12 C.F.R. Part 711]
D CK NO. 82- 21
O ET
Management O ffic ia l Interlocks
FINAL RUI£
AGENCIES: Board o f Governors o f the Federal Reserve System, Comptroller o f the
Currency, Federal Deposit Insurance Corporation, Federal Home Loan Bank Board,
and National Credit Union Administration.
ACTION:
Final Rule.
SU M
M ARY: The agencies are amending their respective regulations implementing
the Depository In stitu tion Management Interlocks Act to r e fle c t recent changes
enacted by Congress in the law. These changes permit a management o f f i c i a l
whose service in an interlocking relationship is grandfathered under the Act to
continue such service for the duration o f the ten year grandfather period
provided in the Act notwithstanding changes in circumstances. The changes also
permit a management o f f i c i a l o f a depository organization and a nondepository
organization to continue such service a fter the nondepository organization
becomes a d iv e rsifie d savings and loan holding company.
EFFECTIVE DATE:
The amendments are a ffe ctiv e October 26, 1982.
FOR FU ER INFORM
RTH
ATION CONTACT: Bronwen Mason (202) 452-3564 or Melanie
Fein (202) 452-3594, Board o f Governors o f the Federal Reserve System;
- 2Jerome Edelstein or Rosemarie Oda (202) 447-1880, O ffice o f the Comptroller o f
the Currency; Pamela E. F. LeCren or Barbara I . Gersten (202) 389-4171, Federal
Deposit Insurance Corporation; David J. B ristol (202) 377-6461 or Kenneth F.
Hall (202) 377-6466, Federal Home Loan Bank Board; or Steven R. Bisker (202)
357-1030, National Credit Union Administration.
SU
PPLEM TARY INFORM
EN
ATION; The Depository Institu tion Management Interlocks Act
("In terlocks A ct") was enacted as t i t l e II o f the Financial Institutions
Regulatory and Interest Rate Control Act o f 1978 (Pub. L. No. 95-630, 12 U.S.C.
S 3201 et s e j . ). The general purpose o f the Interlocks Act, and the fin al
regulations issued thereunder, is to foster competition among depository
in stitu tio n s, depository holding companies, and their a f filia t e s by prohibiting
management o f f i c i a l interlocks between u n affiliated organizations depending upon
their size and location . Final regulations implementing the Interlocks Act were
published e ffe c t iv e July 19, 1979 (44 FR 42152) and were subsequently amended
e ffe c t iv e May 9, 1980 (45 FR 14384).
Under section 206 o f the Interlocks Act (12 U.S.C. S 3205) and the current
regulations, certain persons are "grandfathered" in their position s as
management o f f i c i a l s for a period o f ten years ending November 10, 1988. The
occurrence o f sp ecified "changes in circumstances" as provided in the current
regulations may result in the ea rlie r termination o f grandfathered in terlocks.
Those changes in circumstances are defined to include certain mergers,
a cqu isition s, consolidations, and the establishment o f certain o f f ic e s . T itle
III o f Public Law 97-110, signed into law on December 26, 1981, amended section
206 to provide s p e c ific a lly that mergers, acqu isition s, increases in tota l asset
s iz e , establishment o f one or more o f f ic e s , or change in management
re sp o n s ib ilitie s shall not constitute changes in circumstances that w ill
necessitate early termination o f grandfathered in terlock s. Due to this
statutory change, the agencies are repealing the portion o f their respective
regulations that sets forth mergers, acqu isition s, consolidations, and
establishment o f certain o ffic e s as changes in circumstances that w ill a ffe ct
grandfathered interlocks and deleting other references to that provision.
This action has the e ffe c t o f repealing a fin a l amendment to 12 C.F.R.
S 563f .6(a) (1) ( i ) adopted by the Federal Home Loan Bank Board on December 4,
1981 (See 46 FR 61249 (1981)).
The amended regulation provides that persons who would have been required to
terminate a grandfathered interlock based upon the provision o f the regulations
now being repealed but who have not yet terminated the interlock and persons
who are continuing to serve in an interlocking position under an extension
granted by one o f the agencies may continue their interlocking service until
November 10, 1988. The agencies w ill s o l i c i t comment on whether or not persons
who have already terminated an interlock based upon the provision being repealed
may resume their interlocking service.
The agencies also are amending their regulations to r e fle c t the addition to
section 206 by Public Law 97-110 o f a new subparagraph (b ). Subparagraph (b)
permits an individual who serves as a management o f f i c i a l o f a depository
organization and a nondepository organization to remain in that position
regardless o f the prohibitions o f the Interlocks Act i f the nondepository
organization becomes a d iv e rsifie d savings and loan holding company as that
term is defined by § 408(a)(1)(F ) o f the National Housing Act (12 U.S.C.
S 1730a(a)( 1 ) (F )) .
New subparagraph (b) ceases to operate as o f November 10,
1988. The change in the law w ill be reflected in a new subparagraph (c) to the
provision o f the regulations dealing with permitted interlocking relationships.
I t is the agencies' opinion that the amendment which added subparagraph (b) to
section 206 is fu lly retroa ctive. Thus, a person who, prior to enactment o f the
amendment, resigned frcm either organization a fter the nondepository corporation
became a d iv e rsifie d savings and loan holding company and such resignation was
due to the Interlocks Act may resume his or her previous p o sitio n . Persons who
may continue to serve based upon the addition o f subparagraph (b) to section 206
must terminate their interlocks no la ter than November 10, 1988 i f they have not
done so previously and the interlock is prohibited at that time.
The agencies are undecided on the issue o f whether or not persons covered by
section 206(b) may continue their interlocking service even though subsequent
changes in circumstances occur. It is the agencies' intention to s o l i c i t
comment on whether or not such interlocks may be affected by subsequent changes
in circumstances. Until such time as comment is s o lic it e d and the issue fu lly
considered by the agencies, no regulatory action w ill be taken regarding such
interlocks in the event o f subsequent changes in circumstances.
The agencies are not s o lic it in g public comment with regard to these fin a l
amendments under authority o f 5 U.S.C. § 553(b), which authorizes waiver o f
pu blic comment in the case o f interpretative ru les. The amendments can be
considered interpretative as they merely conform the existing regulations to
Federal law. The amendments are made e ffe c tiv e immediately pursuant to 5 U.S.C.
S 5 5 3(d )(2 ), which authorizes waiver o f a delayed e ffe c tiv e date in the case o f
in terpretative rules.
Regulatory Impact Analysis. Pursuant to section 3 (g)(1 ) o f Executive Order
12291 o f February 17, 1981, it has been determined that the amendments do not
constitu te a major rule within the meaning o f section 1(b) o f the Executive
-
4 -
Order. The amendments eliminate re strictio n s imposed by regulations
implementing the Depository Institu tion Management Interlocks A ct, 12 U.S.C.
§ 3201 et seg. The amendments have no adverse e ffe c t on the operations of the
depository in stitu tion s subject to them. As such, the amendments w ill not have
an annual e ffe c t on the econony o f $100 m illion or more, w ill not a ffe c t cost or
prices for consumers, individual industries, government agencies or geographic
regions, and w ill not have adverse e ffe c t s on competition, employment,
investment, productivity, or on the a b ility o f United States based enterprises
to conpete with foreign based enterprises in domestic or export markets.
Index terms: A ntitrust; Banks, banking; Savings and loans; Credit unions;
Federal Deposit Insurance Corporation; Federal Reserve System; Comptroller
o f the Currency; Federal Home Loan Bank Board; National Credit Union
Administration; Holding conpanies; Management o f f i c i a l in terlocks.
Accordingly, and pursuant to their respective authority under section 209 o f the
Depository In stitu tion Management Interlocks Act (12 U.S.C. § 3207), the
Board o f Governors o f the Federal Reserve System, the Comptroller o f the
Currency, the Federal Deposit Insurance Corporation, the Federal Home Loan Bank
Board, and the National Credit Union Administration amend 12 C.F.R. Parts 212,
26, 348, 563f, and 711 respectively, as follow s:
FEDERAL RESERVE BO
ARD
[12 C.F.R. PART 212]
M N G M N OFFICIAL IN
AAE ET
TERLOCKS
FINAL RU
LE
12 C.F.R. Part 212 is amended as follow s:
1.
The authority c ita tio n for Part 212 reads as follow s:
Authority:
2.
12 U.S.C. § 3201 et seq.
Section 212.4(b)(5) is revised to read as follow s:
Section 212.4 — Permitted interlocking relation sh ips.
*
(b)
*
*
*
*
*
*
*
(5) Loss of management o f f i c i a l s due to change in circumstances.
I f a depository organization experiences a change in circumstances
described in paragraphs (a) and (b) o f § 212.6, and the change requires
the termination of service at the depository organization of 50 percent
or more of the organ ization's directors or of 50 percent or more o f
the tota l management o f f i c i a l s of the depository organization, such
management o f f i c i a l s may continue to serve in excess of the time periods
provided in paragraphs 212.6(a) or 212.6(b): Provided that: (i) Each
management o f f i c i a l so affected agrees to sever the prohibited inter
locking relationship no later than 30 months after the change in circum
stances? ( i i ) the appropriate Federal supervisory agency or agencies
determine that the service by such management o f f i c i a l s is necessary
to provide management or operating expertise? ( i i i ) the depository
organization submits a proposal for the orderly termination o f service
by such management o f f i c i a l s over the time period provided? and (iv)
other conditions in addition to, or in lieu o f , the foregoing may be
imposed by the appropriate Federal supervisory agency or agenices in
any s p e c ific case.
3. Section 212.4 is amended by adding paragraph (c) which reads as
follow s:
Section 212.4 — Permitted interlocking relation sh ips.
*
*
*
*
*
(c) D iversified savings and loan holding company. Notwithstanding
Section 212.3, a person who serves as a management o f f i c i a l of a depository organization and a nondepository organization is not prohibited
'
)
-2 -
from continuing the interlocking service when the nondepository
ization becomes a d iv ersified savings and loan holding company,
defined in Section 408(a)(1 ) (P) o f the National Housing Act (12
§ 1730a(a)( 1 ) (F)) . This subparagraph shall cease to operate on
1988.
4.
organ
as
tJ.S.C.
November 10,
Section 212.5 is revised to read as follow s:
Section 212.5 — Grandfathered interlocking relation sh ips.
A person whose interlocking service in a position as a management
o f f i c i a l of two or more depository organizations began prior to November 10,
1978, and was not immediately prior to that date in violation o f Section 8
o f the Clayton Act (12 U.S.C. § 19) is not prohibited from continuing
to serve in such interlocking positions until November 10, 1988. Any
management o f f i c i a l who has been required to terminate service in one
or more such interlocking positions as a resu lt of a change in circum
stances defined in 12 C.P.R. Part 212.6(a) as i t existed prior to [e ffe c
tive date of this amendment] (12 C.P.R. § 212.6(a) (1981)) but who has
not terminated such service as of [e ffe ctiv e date of this amendment]
is not prohibited from continuing such service until November 10, 1988.
5. Section 212.6 is amended by deleting paragraphs (a)(1) and (2)
and redesignating paragraphs ( b ) (1) and (2) as (a) and (b ), respectively.
By order of the Board o f Governors of the Federal Reserve System,
e ffe c tiv e October 12, 1982.
(signed) William W.Wiles
William W Wiles
.
Secretary o f the Board
[SEAL]
FEDERAL RESERVE SYSTEM
[12 C .F .R . PART 212]
DEPARTMENT OF THE TREASURY
COMPTROLLER OF THE CURRENCY
[12 C .F .R . PART 26]
FEDERAL DEPOSIT INSURANCE CORPORATION
[12 C .F .R . PART 348]
FEDERAL H E LOAN BANK BOARD
OM
[12 C .F .R . PART 5 6 3 f]
NATIONAL CREDIT UNION ADMINISTRATION
[12 C .F .R . PART 711]
D ocket No. 82 -
19
MANAGEMENT OFFICIAL INTERLOCKS
NOTICE OF PROPOSED RULEMAKING
AGENCIES:
Board o f G ov ern ors o f th e F e d e r a l R eserv e System ,
C o m p tr o lle r o f th e C u rre n cy , F e d e r a l D e p o s it In su ra n ce
C o r p o r a t io n , F e d e r a l Home Loan Bank B oa rd , and N a tio n a l C r e d it
Union A d m in is t r a t io n .
ACTION:
N o t ic e o f P rop osed R ulem aking.
SUMMARY: The F e d e r a l R eserv e B oa rd , O f f i c e o f th e C o m p tr o lle r o f
th e C u r r e n c y , F e d e r a l D e p o s it In s u ra n ce C o r p o r a t io n , F e d e r a l Home
Loan Bank Board and N a tio n a l C r e d it Union A d m in is tr a t io n a re
p r o p o s in g t o amend t h e i r r e g u la t i o n s im plem en tin g th e D e p o s ito r y
I n s t i t u t i o n s Management I n t e r l o c k s A c t , 12 U .S .C . S 3201 e t s e q . ,
t o p e r m it a management o f f i c i a l o f a d e p o s i t o r y o r g a n iz a t io n who
te rm in a te d a g r a n d fa th e r e d i n t e r l o c k b e ca u se o f a change in
c ir c u m s t a n c e s , as d e f in e d by th e a g e n c i e s , t o resume th e
i n t e r l o c k f o r th e d u r a t io n o f th e g r a n d fa t h e r p e r io d under th e
A ct.
The a g e n c ie s a r e making t h i s p r o p o s a l t o e x te n d t o such
management o f f i c i a l s th e b e n e f i t o f a s t a t u t o r y amendment t o th e
A c t , w hich p e r m its management o f f i c i a l s , c u r r e n t l y s e r v in g in
g r a n d fa t h e r e d i n t e r l o c k s , t o c o n t in u e such s e r v i c e u n t i l November
1 0 , 19 8 8 , d e s p i t e th e o c c u r r e n c e o f a change in c ir c u m s t a n c e s .
DATE:
W r itte n comments s h o u ld be r e c e i v e d no l a t e r
than
November 26, 1982.
ADDRESS: Comments sh o u ld be d i r e c t e d t o :
D ocket No. [82 - 1 9 ] ,
C om m unications D i v i s i o n , 3rd F l o o r , O f f i c e o f th e C o m p tr o lle r o f
th e C u r r e n c y , 490 L 'E n fa n t P la z a , E a s t, S .W .W a s h in g t o n , D.C.
2 0 219 , A t t e n t i o n :
C. C h r is t in e J o n e s , (2 0 2 ) 4 4 7 -1 8 0 0 .
Comments w i l l be a v a i l a b l e f o r p u b l i c i n s p e c t io n and
p h o to c o p y in g .
FOR FURTHER INFORMATION CONTACT:
Bronwen Mason (2 0 2 ) 452-3564 o r
M elan ie F ein (2 0 2 ) 4 5 2 -3 5 9 4 , Board o f G ov ern ors o f th e F e d e ra l
R eserv e S ystem ; Jerom e E d e ls t e in (2 0 2 ) 44 7-1880 or R osem arie Oda
(2 0 2 ) 4 4 7 -1 8 8 0 , O f f i c e o f th e C o m p tr o lle r o f th e C u rre n cy ; Pamela
E .F . LeCren (2 0 2 ) 3 8 9 -4 1 7 1 , o r B arbara I . G e rste n (2 0 2 ) 3 8 9 -4 1 7 1 ,
F e d e r a l D e p o s it In su ra n ce C o r p o r a t io n ; David J . B r i s t o l (2 0 2 )
3 7 7-6 461 or Kenneth F. H a ll (2 0 2 ) 3 7 7 -6 4 6 6 , F e d e r a l Home Loan
Bank B oard; o r S teven R, B is k e r (2 0 2 ) 3 5 7 -1 0 3 0 , N a tio n a l C r e d it
Union A d m in is t r a t io n ,
SUPPLEMENTARY INFORMATION: On December 2 6 , 1981, P u b lic Law
9 7 -1 1 0 was s ig n e d in t o law amending th e D e p o s it o r y Management
I n t e r l o c k s A c t , 12 U .S .C . S 3201 e_t s e g , , t o p r o v id e th a t
m e rg e r s , a c q u i s i t i o n s , c o n s o l i d a t i o n s and th e e s ta b lis h m e n t o f
o f f i c e s do n o t c o n s t i t u t e ch an ges in c ir c u m s t a n c e s w hich r e q u ir e
t e r m in a t io n o f g r a n d fa th e r e d i n t e r l o c k s .
C o n s e q u e n tly , in a
f i n a l r e g u la t i o n b e in g p u b lis h e d in th e F e d e ra l R e g is t e r by th e
a g e n c ie s , p r o v i s i o n s w hich s p e c i f i e d t h a t th o s e e v e n ts
c o n s t i t u t e d ch an ges in c ir c u m s t a n c e s r e q u ir in g t e r m in a t io n o f
g r a n d fa th e r e d i n t e r l o c k s a re r e s c in d e d .
T h is a c t i o n has th e
e f f e c t o f p e r m it t in g management o f f i c i a l s c u r r e n t l y s e r v in g in
g r a n d fa th e r e d i n t e r l o c k i n g p o s i t i o n s t o c o n t in u e such s e r v i c e
u n t i l November 1 0 , 1988 d e s p i t e th e o c c u r r e n c e o f a m e rg e r,
c o n s o l i d a t i o n , a c q u i s i t i o n o r th e e s ta b lis h m e n t o f an o f f i c e ,
The f i n a l r e g u la t i o n d o e s n o t a d d r e s s th e q u e s t io n o f w hether
management o f f i c i a l s who te rm in a te d t h e i r i n t e r l o c k i n g s e r v i c e
may resume such s e r v i c e .
Under t h e i r ru lem ak ing a u t h o r it y
g r a n te d by S 209 o f th e I n t e r l o c k s A c t , 12 U .S .C . S 3 2 07, th e
a g e n c ie s p r o p o s e t o amend t h e i r r e s p e c t i v e r e g u la t i o n s t o p e rm it
such management o f f i c i a l s t o resume t h e i r i n t e r l o c k i n g s e r v i c e
f o r th e d u r a t io n o f th e g r a n d fa th e r p e r i o d .
A management
o f f i c i a l who te rm in a te d a g r a n d fa th e r e d i n t e r l o c k f o r some r e a s o n
o t h e r than a change in c ir c u m s t a n c e s enum erated in th e
r e g u la t i o n s would n o t be p e r m itte d t o resume th e i n t e r l o c k .
S i m i l a r l y , any p e r s o n who r e s ig n e d from a g r a n d fa th e r e d i n t e r l o c k
o r o t h e r w is e te rm in a te d such s e r v i c e f o r r e a s o n s o t h e r than a
chan ge in c ir c u m s t a n c e s a f t e r enactm ent o f th e amendment would
n o t be p e r m itte d t o resume th e i n t e r l o c k i n g s e r v i c e .
The a g e n c ie s b e l i e v e th a t t h i s p r o p o s e d amendment i s
c o n s i s t e n t w ith th e C o n g r e s s io n a l in t e n t u n d e r ly in g th e s t a t u t o r y
amendment t o a f f o r d an u n in te r r u p te d g r a n d fa th e r p e r io d f o r
i n t e r l o c k s th a t were in e x i s t e n c e when th e I n t e r l o c k s A ct was
en a cted .
T h is in t e n t was e x p r e s s e d in a sta te m e n t d u rin g
C o n g r e s s io n a l c o n s i d e r a t i o n o f th e s t a t u t o r y amendment th a t
management o f f i c i a l s would be p e r m itte d t o resume i n t e r l o c k i n g
s e r v i c e f o r th e d u r a t io n o f the g r a n d fa t h e r p e r i o d .
127 Cong,
R e c. S. 15309 ( d a i l y e d . D ec. 1 5 , 1981) (rem arks o f S e n a to r
G am ) .
I n t e r e s t e d p e r s o n s a re in v it e d t o comment on th e p r o p o s e d
r e g u la t i o n f o r t h i r t y days from th e d a te o f t h i s p u b l i c a t i o n .
A
t h i r t y - d a y comment p e r i o d , r a th e r than a s i x t y - d a y p e r i o d , has
been e s t a b li s h e d t o a v o id any u n n e ce s sa ry d e la y in p e r m it t in g
-3 management o f f i c i a l s t o resume s e r v i c e .
B ecause t h i s p r o p o s a l
i n v o l v e s o n ly one amendment, th e a g e n c ie s b e l i e v e th a t t h i r t y
days p r o v id e s ample o p p o r t u n it y f o r t h o s e in t e r e s t e d in t h i s
r e g u l a t i o n t o comment.
R e g u la t o r y F l e x i b i l i t y A ct A n a l y s i s , P ursuant t o s e c t i o n
6 0 5 (b ) o f th e R e g u la to r y F l e x i b i l i t y A ct (P ub. L. No. 9 6 -3 5 4 , 5
U .S .C . S 601 e t s e g , ) , th e Board o f G ov ern ors o f th e F e d e ra l
R e se rv e S ystem , th e C o m p tr o lle r o f th e C u rre n cy , th e Board o f
D i r e c t o r s o f th e F e d e r a l D e p o s it In s u ra n ce C o r p o r a t io n , the
F e d e r a l Home Loan Bank B oard , and th e Board o f D i r e c t o r s o f th e
N a tio n a l C r e d it Union A d m in is t r a t io n c e r t i f y th a t th e p ro p o s e d
amendment, i f a d o p t e d , w i l l n o t have a s i g n i f i c a n t e co n o m ic
im pact on a s u b s t a n t i a l number o f s m a ll e n t i t i e s .
The p ro p o s e d
amendment would e a s e th e a p p l i c a t i o n o f th e e x i s t i n g r e g u la
tio n s .
The e f f e c t o f th e amendment i s e x p e c te d t o be b e n e f i c i a l
r a th e r than a d v e rs e and s m a ll e n t i t i e s a re g e n e r a lly e x p e c t e d t o
sh a re th e b e n e f i t s o f th e amendment e q u a lly w ith la r g e r
in s titu tio n s .
R e g u la to r y Im pact A n a l y s i s . P u rsu an t t o S e c t io n 3 ( g ) ( 1 ) o f
E x e c u tiv e Order 12291 o f F ebru ary 1 7 , 1 9 81, i t has been
d eterm in ed t h a t th e p r o p o s e d amendment d o e s n o t c o n s t i t u t e a
m ajor r u le w it h in th e meaning o f S e c t io n 1 (b ) o f th e E x e c u tiv e
O rd e r.
The amendment w ould e a s e r e s t r i c t i o n s im posed by
r e g u l a t i o n s im plem en tin g th e D e p o s it o r y I n s t i t u t i o n Management
I n t e r l o c k s A c t , 12 U .S .C . S 3201 e t s e g . , and would have no
a d v e rs e e f f e c t on th e o p e r a t io n s o f th e d e p o s i t o r y i n s t i t u t i o n s
s u b je c t to i t .
As s u c h , th e amendment w ould n o t have an annual
e f f e c t on th e econom y o f $100 m i l l i o n o r m ore, w ould n o t a f f e c t
c o s t o r p r i c e s f o r con su m e rs, i n d iv i d u a l i n d u s t r i e s , governm ent
a g e n c ie s o r g e o g r a p h ic r e g i o n s , and w ould n o t have a d v e rs e
e f f e c t s on c o m p e t it io n , em ploym ent, in v e s tm e n t, p r o d u c t i v i t y , or
on th e a b i l i t y o f U n ited S t a t e s based e n t e r p r i s e s t o com pete w ith
f o r e i g n based e n t e r p r i s e s in d o m e s tic or e x p o r t m a rk e ts,
Index T erm s:
A n t i t r u s t ; Banks, ban k in g? S a v in g s and L oan s;
C r e d it U nions? F e d e r a l D e p o s it In s u ra n ce C o r p o r a t io n ; F e d e ra l
Home Loan Bank Board? F e d e r a l R e se rv e S ystem ; O f f i c e o f th e
C o m p tr o lle r o f th e C u rren cy? N a tio n a l C r e d it Union
A d m in is tr a t io n ? H old in g Companies? Management O f f i c i a l
In te r lo c k s ,
A c c o r d i n g l y , p u rsu a n t t o t h e i r r e s p e c t i v e a u t h o r i t y under
s e c t i o n 209 o f th e D e p o s it o r y I n s t i t u t i o n Management I n t e r l o c k s
A c t (1 2 U .S .C , § 3 2 0 7 ), th e Board 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 , th e C o m p tr o lle r o f th e C u rre n cy , th e F e d e ra l
D e p o s it In s u ra n ce C o r p o r a t io n , th e F e d e r a l Home Loan Bank B oard,
and th e N a tio n a l C r e d it Union A d m in is t r a t io n p r o p o s e t o amend 12
C .F .R . by amending P a r ts 21 2, 2 6 , 34 8, 5 6 3 f, and 711,
r e s p e c t i v e l y , as f o l l o w s :
FEDERAL RESERVE BO
ARD
[12 C.F.R. PART 212]
M N G M N OFFICIAL IN
AAE ET
TERLOCKS
PRO
POSED R LE
U
12 C.F.R. Part 212 is proposed to be amended as follow s:
1.
The authority cita tio n for Part 212 reads as follow s:
Authority:
2.
12 U.S.C. § 3201 et seq.
Section 212.5 is proposed to be revised to read as follow s:
Section 212.5 — Grandfathered interlocking relation sh ips.
A person whose interlocking service in a position as a management
o f f i c i a l 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
o f the Clayton Act (15 U.S.C. § 19) is not prohibited from continuing
to serve in such interlocking positions un til November 10, 1988. Any
management o f f i c i a l who has been required to terminate or who has termi
nated service in one or more such interlocking positions as a resu lt
o f a change in circumstances defined in 12 C.F.R. § 212.6(a) (1981)
is not prohibited from continuing or resuming such service until November 10,
1988.
By order o f the Board o f Governors of the Federal Reserve System,
e ffe c t iv e October 12, 1982.
(signed) William W. Wiles
William W Wiles
.
Secretary o f the Board
[SEAL]
No.
82-505
Date:
J u ly
29,
198 2
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.
82-20
Management Official Interlocks
Notice of Proposed Rulemaking
AGENCIES:
Board of Governors of the Federal Reserve System,
Office of the Comptroller of the Currency, Federal Deposit
Insurance Corporation, Federal Home Loan Bank Board, and
National Credit Union Administration.
ACTION:
Notice of Proposed Rulemaking.
SUMMARY:
The Office of the Comptroller of the Currency, the
Board of Governors of the Federal Reserve System, the Federal
Deposit Insurance Corporation, the National Credit Union
Administration, and the Federal Home Loan Bank Board propose to
amend their regulations implementing the Depository Institution
Management Interlocks Act, which generally prohibits certain
management official interlocks between depository institutions,
depository holding companies, and their affiliates.
The proposed
regulatory amendments would (1) simplify the procedures for ob
taining exceptions to the Act and extensions of time to permit
compliance with the Act, (2) ease the burden of the Act on de
pository institution holding companies by redefining the terms
"office" and "total assets," (3) exclude management officials
whose functions relate exclusively to retail merchandising and
manufacturing, (4) broaden the circumstances under which the
exception to 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 broken until
No.
8 2- 50 5
Page Two
November 10, 1988, despite the occurrence of changes in circum
stances.
These amendments will be of substantial interest to
the banking, savings and loan, and credit union industries.
Interested persons are invited to submit written data, views,
or arguments regarding the proposed amendments for a period of
60 d a y s •
DATE:
Comments must be received by December 27, 1982.
ADDRESS:
Please send your comments to Docket No. 82-20,
Communications Division, Third Floor, Office of the Comptroller
of the Currency, 490 L'Enfant Plaza East, S.W., Washington, D.C.
20219.
Attn:
C. Christine Jones ((202) 447-1800).
All comments
received will be made available for public inspection.
FOR FURTHER INFORMATION CONTACT:
Bronwen Mason ((202) 452-3564)
or Melanie Fein ((202) 452-3594), Board of Governors of the Federal
Reserve System? Jerome Edelstein 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 Kenneth F. Hall
((202) 377-6466), Federal Home Loan Bank Board? or Steven R. Bisker
((202) 357-1030), National Credit Union Administration.
SUPPLEMENTARY INFORMATION:
The Depository Institution Management
Interlocks Act ("Interlocks Act") was enacted as Title II of the
Financial Institutions Regulatory and Interest Rate Control Act of
1978 (Pub. L. No. 95-630, 12 USC 3201 et seq.). The general
purpose of the Interlocks Act, and the final regulations issued
thereunder, is to foster competition among depository institutions,
depository holding companies, and their affiliates.
Final regula
tions implementing the Act were published on July 19, 1979 (44 Fed.
Reg. 42152) and were subsequently amended effective May 9, 1980
(45 Fed. Reg. 24384).
In addition, section 206 of the Act was
amended by Congress on December 26, 1981 (International Banking
Facility Deposit Insurance Act, Pub. L. No. 97-110, 95 Stat. 1513),
and final and proposed regulations giving effect to the statutory
amendment are being published in the Federal Register.
Under the Interlocks Act and the current regulations, a person
is prohibited from serving as a management official of two or more
unaffiliated depository organizations if those organizations, or
their depository institution affiliates, have offices located in
the same community ("community prohibition").
Similarly, a person
may not serve as a management official of two unaffiliated deposi
tory organizations if one of the organizations has total assets of
$20 million or more and both organizations, or their depository
institution affiliates, one of which has total assets of $20
million or more, have offices located in the same Standard Metro
politan Statistical Area ("SMSA prohibition").
Finally, a person
No.
8 2- 5 05
Page Three
may not serve as a management official of two unaffiliated de
pository organizations or their depository and non-depository
affiliates if one of the depository organizations has total
assets in excess of $1 billion and the other has total assets
in excess of $500 million ("major assets prohibition").
The
regulations provide that certain exemptions from these prohi
bitions may be granted by the appropriate supervisory agencies
upon request.
In addition, section 206 of the Act, as amended
on December 26, 1981, provides that interlocks between depository
organizations that existed on November 10, 1978, are "grand
fathered" for a period of ten years until November 10, 1988.
As amended, section 206 also provides a limited ten-year exemption
for management officials serving concurrently with a non-depository
corporation and one or more depository organizations whose con
current service would otherwise become prohibited as a result of
the nondepository corporation becoming a diversified savings and
loan holding company (as defined in 12 USC 1730a(a)(1)(F)).
The proposed amendments, if adopted, would relax restric
tions of the current regulations and clarify the operation of
certain provisions.
The proposed amendments are based on the
amendment to section 206 of the Act as well as on the agencies'
experience in administering the regulations.
Although the proposed
amendments would ease the application of the current regulations,
which are designed to foster competition among depository organi
zations, the agencies do not anticipate that the proposed changes
will adversely affect competition.
These proposals are in fur
therance of the objectives of the Financial Institutions Regulation
Simplification Act of 1980 (Title VIII, Pub. L. No. 96-221; 12
USC 3521 et seq.), which requires that regulations minimize
whatever burdens are necessary.
The changes would not establish
any recordkeeping or reporting requirements.
It is anticipated
that depository institutions in general would benefit from the
proposed amendments.
The proposed amendments and a full ex
planation of their effect follows.
1.
Definition of "Management Official"— Exclusion of Certain
Persons. Under the current regulations, a person whose management
functions relate exclusively to the business of retail merchandising
or manufacturing is not a management official for purposes of the
prohibition based on major assets.
Such a person is, however, con
sidered a management official for purposes of the community and
SMSA prohibitions.
It has come to the agencies' attention that
providing an exclusion only from the major assets prohibition
creates an inconsistent result.
A holding company employee with
management functions solely over manufacturing or retailing acti
vities may serve as a management official of depository organizations
located anywhere in the country except in the SMSA or community
where the holding company or its depository institution affiliates
are located.
The agencies propose to amend the definition so that
a person whose management functions relate exclusively to retail
merchandising or manufacturing is not considered a management
official for purposes of any of the general prohibitions of the
regulation.
No.
8 2- 50 5
Page Four
2. Definition of “Office.* The proposed amendments would
*
exclude from the definition of "office" an office of a depository
holding company.
The definitional change is necessary to reflect
a substantive change in the prohibitions of the regulation dis
cussed at length below under the heading "General Prohibitions."
3.
Definition of "Total Assets"— Total Assets of Certain
Holding Companies. The agencies propose to amend the definition
of "total assets" to provide that the total assets of diversified
savings and loan holding companies and bank holding companies exempt
from the Bank Holding Company Act by virtue of § 4(d) of that Act
("diversified holding companies") equal only the assets of their
depository institution affiliates.
Currently, the total assets of
a diversified holding company are defined to include the assets
of the company's depository institution affiliates for purposes
of the SMSA prohibition, and the assets of all affiliates for
purposes of the major assets prohibition.
Thus, a management
official of a diversified holding company with assets exceeding
$1 billion is prohibited from serving as a management official
of a depository organization with assets exceeding $500 million,
regardless of the size or location of the depository institution
affiliate that causes the diversified holding company to be in
cluded as a depository organization under the regulations.
By amending the definition of total assets as proposed, the
regulations would key the interlocks prohibitions to the size of
the diversified holding company's depository institution affiliate
rather than to the size of the holding company system.
The agencies
believe that focusing on the depository institution affiliate is
appropriate because the primary business activities of diversified
holding companies normally do not involve competition among deposi
tory organizations of the type that the Interlocks Act is intended
to foster.
In addition, the depository institution affiliate gene
rally represents a very small part of the assets and income of the
holding company.
Thus, it has been the experience of the agencies
in the case of diversified holding companies that the asset size of
the holding company itself is not an accurate measure of the market
in which its depository institution affiliate actually competes.
The effect of the proposed amended definition is illustrated
by the following examples
X is a management official of Holding
Company A and wishes to serve as a management official of Bank B.
Holding Company A is a diversified bank holding company with con
solidated assets, including the assets of all of its affiliates,
in excess of $1 billion.
Its only depository institution affiliate
is located in SMSA 1. Bank B ’s total assets exceed $1 billion and
all of its offices are located in SMSA 2. Under the proposed amend
ment, the total assets of Holding Company A would equal the total
assets of its depository institution affiliate.
Thus, X's con
current service would be prohibited only if the assets of A's
depository institution affiliate exceeded $500 million.
No.
8 2- 505
Page Five
The agencies also propose to make technical changes in the
definition of "total assets" to reflect the changes proposed in
the general prohibitions discussed below.
Under the current
regulations, the total assets of a depository holding company
include or exclude the assets of its nondepository institution
affiliates depending upon whether the SMSA or major assets pro
hibitions are to be applied.
The proposed change would eliminate
that distinction since the total assets of a depository holding
company will be irrelevant for purposes of the SMSA prohibitions
under the proposed amendments.
4.
General Prohibitions. The agencies have proposed a
revision to the general prohibitions section of the regulations
that clarifies the language of the section and, in conjunction
with the redefinition of "office," effects a substantive change
in its application.
The general prohibitions of the current
regulations provide that a management interlock may be prohibited
due to the location of a depository holding company regardless
of whether its depository institution affiliates are located in
the same community or SMSA as the holding company.
For example,
the regulations currently prohibit two depository holding companies
located in the same community from sharing management officials
even though neither has depository institution affiliates located
in that community or in the same community anywhere in the country.
The agencies believe that this prohibition is unduly harsh.
The proposed amendment would apply the community and SMSA
prohibitions of the regulation solely with reference to the
location and asset size of depository institutions and would
eliminate from consideration the location or asset size of de
pository holding companies.
This proposed change would permit
a depository holding company to interlock with another depository
holding company located in the same community or SMSA, unless
the major assets prohibition would apply or unless both companies
have depository institution affiliates located in that community
or SMSA and, in the case of an SMSA, one or both of the affiliates
have assets in excess of $20 million.
5. Exemption Relating to Diversified Savings and Loan Holding
Companies.
On December 26, 1981, section 206 of the Interlocks Act was
amended by adding a new subsection (b), effective as of November 10,
1978, the date of enactment of the Act.
Subsection (b), which
expires on November 10, 1988, provides that a person serving as
a management official of a non-depository corporation and of a
depository organization is not prohibited from continuing to
serve with both entities as a result of the non-depository corpo
ration becoming a diversified savings and loan holding company,
as defined in section 408(a) of the National Housing Act (12
USC 1730a(a)(1)(F)). Without this express exemption, the trans
formation of the corporation into a depository organization
No.
8 2- 50 5
Page Six
would subject the official's dual service to the prohibitions
of the Interlocks Act.
Even if such dual service commenced
prior to November 10, 1978, it would not be grandfathered under
the Act since section 206 grants grandfather rights only to
interlocks between depository organizations.
The agencies in a related action have amended their respective
regulations to reflect the addition of subsection (b) to section
206 of the Interlocks Act.
This proposal would further amend the
regulations to provide that persons who were serving a deposi
tory organization and a nondepository organization when the
latter became a diversified savings and loan holding company may
maintain any interlocking service that existed when the corporation
became a diversified savings and loan holding company until
November 10, 1988, regardless of whether subsequent changes in
circumstances occur that otherwise would require termination of
such service.
This proposed change reflects the agencies' view
that section 206(b) of the Interlocks Act grants rights similar
to those provided to grandfathered management officials by section
206(a), as amended by Congress.
This interpretation is supported
by the legislative history.
In addition, the proposal would permit interlocks between a
depository organization and any nondepository subsidiaries of a
nondepository organization that becomes a diversified savings
and loan holding company to continue until November 10, 1988.
If the agencies were to apply subsection (b) only to officials
of the nondepository parent organization, inconsistencies would
result since the exemption would then permit continued service
by the management officials of the parent organization if the
organization itself purchased the shares of a savings and loan,
but would not permit the same officials to serve with a shell
holding company set up by the parent organization to acquire the
savings and loan.
For example, if a management official were
serving concurrently with Bank A, Nondepository Organization B,
and Nondepository Organization C (a nondiversified shell holding
company formed by B), and if C acquired a savings and loan associ
ation, the official would have to terminate his or her interlocking
service with A and C even though none of the interlocks would have
to be broken if B acquired the savings and loan directly.
The
effect of such an uneven application would be to discriminate
against nondepository organizations that desired to acquire savings
and loans through subsidiary holding companies, a result the agencies
believe was not intended by Congress.
6.
Agency Approval of Exceptions. The agencies have proposed
a revision m the manner in which exceptions are granted under the
regulations.
Under the current regulations, an exception must be
approved by both the federal supervisory agency of the institution
in need of the exception and the supervisory agency of the other
institution(s) involved in the interlock.
Frequently, the primary
No.
82-505
Page Seven
federal supervisor is not the same for each institution, and an
applicant for the exception must apply to two or more different
agencies.
In the interests of simplifying the application of the
regulations and affording prompt relief to institutions in need of
management expertise, the agencies believe that approval by only
the federal supervisory agency of the needy institution should be
required for an exception to be granted.
Approval by the other
supervisory agencies involved would not be required.
The pro
posed regulation would make clear that, if the depository
institution seeking to qualify under one of the exceptions had
no federal supervisory agency, the federal supervisory agency
of the other institution involved in the proposed interlock
would grant or deny the applied-for exception.
7.
Extension for Disruptive Management L o s s . The current
regulations provide that the agencies may extend for a period
of up to 30 months the compliance period for depository organi
zations losing 50 percent or more of their directors or total
management officials as a result of changes in circumstances
requiring the termination of management official interlocks.
Based on the agencies' experience with this provision, the
agencies propose the following changes:
(a) The current provision becomes operative when a deposi
tory institution faces the loss of 50 percent of either its
directors or total management officials.
Recognizing that the
loss of a smaller percentage of management officials may also
cause significant disruption to a depository organization, the
agencies propose to reduce to 30 percent the percentage necessary
to qualify for the extension.
(b) Under the existing regulations, the 30-month extension
becomes available only when the depository organization facing
disruptive management loss experiences a change in circumstances.
It has come to the agencies' attention that a depository organi
zation may experience a disruptive loss of management officials
due to changes in circumstances involving other depository
organizations but not the affected organization itself, or due
to a series of changes in circumstances involving the organization
and other depository organizations.
Recognizing that these
situations also may cause disruptive management loss, the agencies
propose to make the 30-month extension available when any change
in circumstances or combination of changes in circumstances
results in the potential loss of 30 percent or more of an organi
zation's directors or total management officials.
Under the
proposed amendments, changes in circumstances that occur within
a 15-month period will be viewed in the aggregate in order to
determine whether the requisite percentage exists.
The 30-month
period would be measured from the date of the first change in
circumstances that occurred within the 15-month period.
No.
82-505
Page Eight
The following example illustrates how the new provision would
operate:
Bank A, located in SMSA 1, has 10 directors.
One of
Bank A's directors serves as a director of Bank B in SMSA 2, one
serves as director of Bank C in SMSA 3, and one serves as director
of Bank D in SMSA 4.
In Month 1, Bank B merges with a bank in
SMSA 1.
In Month 7, Bank A merges with a bank located in SMSA 4.
In Month 13, Bank C merges with a bank in SMSA 1. As a result
of these mergers, Bank A's interlocks with each of the other
three banks become prohibited.
Bank A's management officials
may apply for an extension to terminate the prohibited interlocks,
which would end 30 months from the first change in circumstances.
(c)
Under the current regulations, an organization qualifying
for the 30-month extension must experience a change in circumstances
that "requires the termination of service" of its directors or
management officials.
When some of the directors whose interlocks
become prohibited in fact intend to retain their positions with
the depository organization experiencing the change in circum
stances, the extension would not appear to be necessary to avoid
unduly disrupting the affected organization.
For this reason,
the agencies propose to limit the availability of the extension
by requiring applicants to submit a written statement demon
strating the likelihood of disruptive management loss.
The
agencies do not believe this requirement would impose an undue
regulatory burden? its purpose would be simply to ensure that the
30-month extension is granted only to organizations truly in need
of relief.
For purposes of demonstrating the likelihood of manage
ment loss, the agencies propose to establish a rebuttable pre
sumption that a director who is a full-time employee of the affected
organization normally would not terminate interlocking service by
resigning from that organization.
The agencies believe that such
a presumption is reasonable and would ease the regulatory burden
in evaluating requests under this provision.
8.
Changes in Circumstances — Nongrandfathered Interlocks.
The Interlocks Act authorizes the agencies to grant a period of
time, not in excess of 15 months, for compliance with the Act
following changes in circumstances that cause interlocks to
become prohibited.
The current regulations provide that a manage
ment official with a nongrandfathered interlock that becomes
prohibited as a result of a voluntary change in circumstances
may continue to serve until the next regularly scheduled annual
shareholders meeting of the institutions involved following a
change in circumstances, unless the agencies impose a shorter
time period.
The management official may request an extension
of the grace period not in excess of 15 months from the date of
the change in circumstances.
If the management official's non
grandfathered service becomes prohibited due to an involuntary
change in circumstances, however, such as natural growth or a
change in community or SMSA boundaries, the maximum 15-month
grace period applies.
1
i
No.
82-505
Page Nine
In order to simplify the grace period provision, the agencies
propose to provide the maximum 15-month grace period for all changes
in circumstances, whether voluntary or involuntary.
This change
would eliminate the necessity for institutions to apply for ex
tensions of time, which in most cases are only for several months.In view of this proposal, the distinction between voluntary and
involuntary interlocks would no longer be necessary.
Accordingly,
the proposed amendments would eliminate the distinction.
Since adopting the regulations, it has been the agencies'
experience that other changes in circumstances, such as the
termination of an affiliate relationship between two or more
depository organizations, may cause nongrandfathered interlocks
to become prohibited.
The list of changes in circumstances
specified in the regulations was intended to reflect the most
commonly occurring changes and, as indicated when the regula
tions were originally adopted, was not intended to be exhaustive.
To clarify their intent in this regard, the agencies propose to
amend the regulations to indicate that nongrandfathered interlocks
that become prohibited due to changes in circumstances other
than those enumerated in the regulation also will be eligible for
a grace period.
The amendment also would specifically include
disaffiliation as a change in circumstances.
9. Effect on Clayton A c t . The Board of Governors of the
Federal Reserve System is proposing to make a technical change
in its regulation by eliminating section 212.7 pertaining to the
effect of the Interlocks Act on the Clayton Act.
This section
states that the Board of Governors regards the provisions of the
first three paragraphs of section 8 of the Clayton Act to have
been supplanted by the Interlocks Act.
The other agencies' regu
lations do not include this provision since only the Board of
Governors had jurisdiction over management interlocks under the
Clayton Act prior to enactment of the Interlocks Act.
The sub
stance of the section will be incorporated into the authority
section of the regulation.
This proposed change is intended to
make the agencies' regulations more uniform in appearance.
10.
Regulatory Flexibility Act Analysis. Pursuant to
section 605(b) of the Regulatory Flexibility Act (Pub. L. No.
96-354, 5 U.S.C. § 601 et seq.), the Board of Governors of the
Federal Reserve System, the Comptroller of the Currency, the
Federal Deposit Insurance Corporation, the Federal Home Loan
Bank Board, and the National Credit Union Administration certify
that the proposed amendments, if adopted, will not have a signi
ficant economic impact on a substantial number of small entities.
The proposed amendments would ease the application of the existing
regulations and do not have any particular effect on small entities.
The effect of the amendments is expected to be beneficial rather
than adverse and small entities are generally expected to share
the benefits of the amendments equally with larger institutions.
No.
8 2- 505
Page Ten
11.
Regulatory Impact Analysis. Pursuant to Section 3(g)(1)
of Executive Order 12291 of February 17, 1981, it has been deter
mined that the proposed amendments do not constitute a major
rule within the meaning of Section 1(b) of the Executive Order.
The amendments ease restrictions imposed by regulations implementing
the Depository Institution Management Interlocks Act, 12 U.S.C.
§ 3201 et seq., in instances where the easing of such restrictions
has no anticompetitive effect.
The amendments have no adverse
effect on the operations of the depository institutions subject
to them.
As such, the amendments will not have an annual effect
on the economy of $100 million or more, will not affect costs or
prices for consumers, individual industries, government agencies
or geographic regions, and will not have adverse effects on
competition, employment, investment, productivity, or on the
ability of United States based enterprises to compete with foreign
based enterprises in domestic or export markets.
Index terms:
Antitrust; Banks, banking; Credit unions; Savings
and loan associations; Federal Deposit Insurance Corporation;
Federal Reserve System; Comptroller of the Currency; Federal
Home Loan Bank Board; National Credit Union Administration;
Holding companies; Management official interlocks.
Accordingly, pursuant to their respective authority under
section 209 of the Depository Institution Management Interlocks
Act (12 U.S.C. § 3207), 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 hereby propose to
amend Title 12 of the Code of Federal Regulations by amending
Parts 26, 212, 348, 563f, and 711, respectively, as follows:
FEDERAL RESERVE BOARD
[12 C.F.R. PART 212]
MANAGEMENT OFFICIAL INTERLOCKS
PROPOSED RULE
12 C.F.R. Part 212 is proposed to be amended as follows:
1.
The authority citation for Part 212 reads as follows:
Authority:
2.
12 U.S.C. § 3201 et seq.
Section 212.2(h),
S
(i) and (1) are proposed to be revised as follows:
212.2 Definitions.
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(h)
(1) "Management official" means (i) am employee or officer with
management functions (including a branch manager); (ii) a director
(including an advisory director or honorary director); (iii) a trustee
of a business organization under the control of trustees (e.g.,
mutual
savings bank); or (iv) any person who has a representative or nominee
serving in any such capacity.
(2) "Management official* does not include
(i) a person whose management functions relate exclusively to the business
of retail merchandising or manufacturing; (ii) a person whose management
functions relate principally to the business outside the United States
of a foreign commercial bank; or (iii) persons described in the provisos
of section 202(4) of the Interlocks Act (12 U.S.C. S 3201(4)).
a
(i) "Office" means a principal or branch office, located in the
United States, of a depository institution. "Office" does not include
representative office of a foreign commercial bank, an electronic
terminal, or a loan production office, or any office of
depository
holding company.
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a
(1)
"Total assets” means assets measured on
consolidated basis
as of the close of the organization's last fiscal year. The "total
assets" of a depository holding company include the total assets of
all of its affiliates, except that "total assets" of
diversified
savings and loan holding company, as defined in section 408(a)(1)(F)
of the National Housing Act (12 U.S.C. § 1730a(a)(1)(F)), or of a bank
holding company that is exempt from the prohibitions of section 4 of
the Bank Holding Company Act of 1956 pursuant to an order issued under
section 4(d) of that Act (12 U.S.C. S 1843(d)), means only the total assets
of its depository institution affiliate. The "total assets" of a United
a
States branch or agency of a foreign commercial bank means the total
assets of such branch or agency itself exclusive of the assets of the
other offices of the foreign commercial bank.
3.
Section 212.3(a) and (b) are proposed to be revised as follows:
s 212.3 General Prohibitions.
(a) Community. A management official of a depository organization
may not serve at the same time as a management official of another
organization not affiliated with it if:
(1)
both are depository institutions and each has an office
in the same community;
(2)
offices of depository institution affiliates of both
are located in the same community; or
(3)
one is a depository institution that has an office in
the same community as a depository institution affiliate
of the other.
(b) Standard Metropolitan Statistical Area ("SMSA"). A management
official of a depository organization may not serve at the same time
as a management official of another depository organization not affiliated
with it if:
(1)
both are depository institutions, each has an office
in the same SMSA, and either institution 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 deposi
tory institution affiliates has total assets of $20
million or more; or
(3)
one is a depository institution that has an office in
the same SMSA as a depository institution affiliate
of the other and either the depository institution or
the depository institution affiliate has total assets
of $20 million or more.
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4.
Section 212.4 is proposed to be amended by revising paragraph (b),
subparagraphs (b)(1), (b)(2), (b)(3), and (b)(5), and paragraph (c)
to read as follows:
§ 212.4 Permitted interlocking relationships.
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(b) Interlocking relationships permitted by agency order. A manage
ment official or a prospective management official of a state member
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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 organ
ization that falls within one of the classifications set out below is
not subject to the interlocks regulations of any of the federal super
visory agencies, then the Board shall determine whether the relationship
meets the requirements of this paragraph.
(1) Organization in low income area; minority 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 (A) located, or to be located,
in a low income or other economically depressed area, or (B) controlled
or managed by persons who are members of minority groups or by women,
subject to the following conditions:
(i) the relationship is necessary
to provide management or operating expertise to the organization specified
in (A) or (B) above; (ii) no interlocking relationship permitted by
this subparagraph shall continue for more than five years? 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.
(2) Newly-chartered organization. A person may serve at the
same time as a management official of two or more depository organi
zations 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 newly-chartered organization? (ii) no interlocking
relationship permitted by this subparagraph shall continue for more
than two years after the newly-chartered 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 safety 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 deposi
tory 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.
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(5)
Loss of management officials due to changes in circum
stances. If a depository organization is likely to lose 30 percent
or more of its directors or of its total management officials due to
a change in circumstances described in section 212.6 of this Part, the
affected management officials may continue to serve in excess of the
time periods specified in section 212.6, provided that:
(i) the deposi
tory organization's prospective loss of management officials or directors
will be disruptive to the internal management of the depository organi
zation? (ii) the depository organization submits a written statement
demonstrating that, absent a grant of relief in accordance with this
subparagraph, 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 manage
ment 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 submits a proposal 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 circum
stances, the 30-month period is measured from the first change in circum
stances). Other conditions in addition to, or in lieu of, the foregoing
may be imposed by the Federal supervisory agency. In evaluating written
statements submitted pursuant to this subparagraph, the Federal super
visory agency will presume that a director who also is a paid, full
time employee of the depository organization, absent unusual circum
stances, will not resign from the position of director with that deposi
tory organization. This presumption may, however, be rebutted by a
showing that such unusual circumstances exist.
(c)
Diversified savings and loan holding company. Notwithstanding
section 212.3, a person who serves as a management official of a deposi
tory organization and of a non-depository organization (or its subsidiary
affiliates) 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. S 1730a(a)(1)(F)), and may con
tinue to serve until November 10, 1988, despite the occurrence of any
subsequent changes in circumstances.
5.
Section 212.6 is proposed to be revised as follows:
S 212.6 Changes in circumstances.
(a)
Non-grandfathered interlocks. If a person's service as a
management official is not grandfathered under section 212.5 of this
Part, the person's service must be terminated if a change in circum
stances causes such service to become prohibited. Such a change may
include, but is not limited to, an increase in asset size of an organ
ization due to natural growth, a change in SMSA or community boundaries
or the designation of a new SMSA, an acquisition, merger or consoli
dation, the establishment of an office, or a disaffiliation.
(b) Grace period. If a person's non-grandfathered 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 12, 1982.
(signed) William W. Wiles
William W. Wiles
Secretary of the Board
[SEAL]
@FedFRASER