[Federal Register: September 24, 1999 (Volume 64, Number 185)]
[Rules and Regulations]
[Page 51673-51681]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24se99-2]
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DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
12 CFR Part 26
[Docket No. 99-11]
RIN 1557-AB60
FEDERAL RESERVE BOARD
12 CFR Part 212
[Docket No. R-0907]
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 348
RIN 3064-ACO8
DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
12 CFR Part 563f
[Docket No. 99-36]
RIN 1550-AB07
Management Official Interlocks
AGENCIES: Office of the Comptroller of the Currency, Treasury; Board of
Governors of the Federal Reserve System; Federal Deposit Insurance
Corporation; Office of Thrift Supervision, Treasury.
ACTION: Joint final rule.
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SUMMARY: The Office of the Comptroller of the Currency (OCC), Board of
Governors of the Federal Reserve System (Board), Federal Deposit
Insurance Corporation (FDIC), and Office of Thrift Supervision (OTS)
(the Agencies) are revising their rules regarding management
interlocks. The final rule conforms the interlocks rules to recent
statutory changes, modernizes and clarifies the rules, and reduces
unnecessary regulatory burdens where feasible, consistent with
statutory requirements.
EFFECTIVE DATE: This joint rule is effective January 1, 2000.
FOR FURTHER INFORMATION CONTACT: OCC: Emily R. McNaughton, National
Bank Examiner, Senior Policy Analyst, Core Policy Development (202)
874-5190; Jackie Durham, Senior Licensing Policy Analyst, Bank
Organization and Structure (202) 874-5060; Sue E. Auerbach, Senior
Attorney, Bank Activities and Structure (202) 874-5300; or Mark
Tenhundfeld, Assistant Director, Legislative and Regulatory Activities
(202) 874-5090. Office of the Comptroller of the Currency, 250 E
Street, SW, Washington, DC 20219.
Board: Thomas M. Corsi, Senior Counsel (202) 452-3275, or Andrew
Baer, Attorney (202) 452-2246, Legal Division, Board of Governors of
the Federal Reserve System. For the hearing impaired only,
Telecommunication Device for Deaf (TDD), Dorothea Thompson (202) 452-
3544, Board of Governors of the Federal Reserve System, 20th and C
Streets, NW, Washington, DC 20551.
FDIC: Curtis Vaughn, Examination Specialist, Division of
Supervision, (202) 898-6759; or Mark Mellon, Counsel, Regulation and
Legislation Section, Legal Division, (202) 898-3854, Federal Deposit
Insurance Corporation, 550 17th Street, NW, Washington, DC 20429.
OTS: David Bristol, Senior Attorney, Business Transactions
Division, Chief Counsel's Office (202) 906-6461; or Joseph M. Casey,
Supervision Policy, (202) 906-5741, Office of Thrift Supervision, 1700
G Street, NW, Washington, DC 20552.
SUPPLEMENTARY INFORMATION:
I. Background
The Depository Institution Management Interlocks Act (12 U.S.C.
3201-3208) (the Interlocks Act or Act) generally prohibits bank
management officials from serving simultaneously with two unaffiliated
depository institutions or their holding companies (depository
organizations). The scope of the prohibition depends on the size and
location of the organizations involved. For instance, the Act prohibits
[[Page 51674]]
interlocks between unaffiliated depository organizations, regardless of
size, if each organization has an office 1 in the same
community (the community prohibition). Interlocks are also prohibited
between unaffiliated depository organizations if each organization has
total assets of $20 million or more and has an office in the same
relevant metropolitan statistical area (RMSA) (the RMSA prohibition).
The Interlocks Act also prohibits interlocks between unaffiliated
depository organizations, regardless of location, if each organization
has total assets exceeding specified thresholds (the major assets
prohibition).
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\1\ Each of the Agencies' regulations generally define
``office'' as a home or branch office. See 12 CFR 26.2 (OCC), 212.2
(Board), 348.2 (FDIC), and 563f.2 (OTS).
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Summary of Statutory Changes
Section 2210 of the Economic Growth and Regulatory Paperwork
Reduction Act of 1996 (Pub. L. 104-208, 110 Stat. 3009-409) (the EGRPR
Act) amended sections 204, 206 and 209 of the Interlocks Act (12 U.S.C.
3203, 3205 and 3207). Section 2210(a) of the EGRPR Act amended the
Interlocks Act by changing the thresholds for the major assets
prohibition under 12 U.S.C. 3203. Prior to the EGRPR Act, management
officials of depository organizations with total assets exceeding $1
billion were prohibited from serving as management officials of
unaffiliated depository organizations with assets exceeding $500
million, regardless of the location of the organizations.2
The EGRPR Act raised the thresholds to $2.5 billion and $1.5 billion,
respectively. The amendment also authorized the Agencies to adjust the
thresholds by regulation, as necessary to allow for inflation or market
conditions.
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\2\ The Agencies define ``total assets'' of diversified savings
and loan holding companies and bank holding companies exempt from
section 4 of the Bank Holding Company Act (12 U.S.C. 1843) to
include only the assets of their depository institution affiliates.
See 12 CFR 26.2(r) (OCC), 212.2(q) (Board), 348.2(q) (FDIC), and
563f.2(r) (OTS).
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Section 2210(b) of the EGRPR Act permanently extended the
grandfather exemptions for management officials whose service began
before November 10, 1978, which appear at 12 U.S.C. 3205(a) and (b)
which were due to expire in 1998. The EGRPR Act repealed section
3205(c) which mandated Agency review of these grandfathered interlocks
before March 1995.
The EGRPR Act also amended 12 U.S.C. 3207 to provide that the
Agencies may adopt regulations that permit service by a management
official that would otherwise be prohibited by the Interlocks Act, if
such service would not result in a monopoly or substantial lessening of
competition. This change repealed the specific ``regulatory standards''
and ``management consignment'' exemptions added by the Riegle Community
Development and Regulatory Improvement Act of 1994 (CDRI
Act),3 and restored the Agencies' broad authority to create
regulatory exemptions to the statutory prohibitions on interlocks.
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\3\ The Agencies adopted final regulations implementing the
management interlocks provisions of the CDRI Act, effective October
1, 1996. See 61 FR 40293 (August 2, 1996).
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II. The Proposal
On August 11, 1998, the Agencies published a joint notice of
proposed rulemaking (the Proposal) (63 FR 43052) to implement the
statutory changes made by the EGRPR Act. In addition, the Proposal
renewed an earlier proposal for a small market share exemption that the
Board, OCC, and FDIC had advanced before enactment of the CDRI Act.
III. The Final Rule and Comments Received
The Agencies received a total of seven comments,4 some
of which were sent to more than one agency. Commenters generally
supported the Proposal. A few commenters, while supporting the
Proposal, suggested that the Agencies make additional changes as
discussed later in this preamble. Most of the proposed changes received
either no comments or uniformly favorable comments. Accordingly, except
where noted in the text that follows, the Agencies have adopted the
Proposal without change. The following discussion summarizes the
amendments to the Agencies' management interlocks rules and the
comments received.
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\4\ The Board received 4 comments from the public, while the
OCC, FDIC, and OTS received 4, 6, and 5 respectively.
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A. Definitions
The Agencies' regulations define key terms implementing the
Interlocks Act. The Agencies added or revised a number of these
definitions in 1996 to implement the CDRI Act.5 With the
repeal of the specific exemptive standards in the CDRI Act, two of
these definitions became unnecessary, specifically, ``anticompetitive
effect'' and ``critical''. The Agencies therefore proposed that they be
removed.
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\5\ See 61 FR 40293 (August 2, 1996).
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The Agencies received only one comment on the proposed elimination
of these terms. The commenter agreed that these definitions should be
removed. The Agencies therefore adopt this provision without any
changes.
B. Major Assets Prohibition
Prior to the EGRPR Act, if a depository institution or depository
holding company had total assets exceeding $1 billion, a management
official of the institution or any of its affiliates could not serve as
a management official of any other nonaffiliated depository institution
or depository holding company having total assets exceeding $500
million or as a management official of any affiliates of the other
institution, regardless of location. The EGRPR Act revised the asset
thresholds for the major assets prohibition from $1 billion and $500
million to $2.5 billion and $1.5 billion, respectively. The legislation
also authorized the Agencies to adjust the threshold from time to time
to reflect inflation or market changes.
The Agencies proposed to amend the regulations to reflect the new
threshold amounts, and to add a mechanism providing for periodic
adjustments of the thresholds. The adjustment would be based on changes
in the Consumer Price Index for Urban Wage Earners and Clerical Workers
(the Consumer Price Index). In those years when changes in the Consumer
Price Index would change the thresholds by more than $100 million, the
Agencies will adjust the threshold and announce the change by a final
rule without notice and opportunity for comment published in the
Federal Register. For those years in which changes in the Consumer
Price Index would not change the thresholds by more than $100 million,
the Agencies will not adjust the threshold. The Agencies invited
comment on other types of market changes that may warrant subsequent
adjustments to the major assets prohibition. The Agencies, however,
wish to clarify that if they do not adjust the threshold to reflect a
Consumer Price Index change in any given year, they will consider the
change for that year in computing adjustments to the threshold in
subsequent years.
Two commenters supported the proposed adjustment of the major asset
thresholds based on the Consumer Price Index. One commenter, however,
suggested that the Agencies notify financial institutions of threshold
amounts at least annually even if they are not adjusted.
The Agencies believe that the $100 million benchmark will make it
easy for the banking industry to keep track of the thresholds while
preserving the flexibility to reflect changes in the economy that are
significant enough to
[[Page 51675]]
warrant changing the asset thresholds. Accordingly, the Agencies adopt
the mechanism providing for periodic adjustments of the thresholds set
forth in the Proposal without any changes.
C. Regulatory Standards and Management Consignment Exemptions
The current regulations contain Regulatory Standards and Management
Consignment exemptions which were predicated on section 3207 of the
Interlocks Act. The EGRPR Act removed the specific exemptions from the
Interlocks Act and substituted a general authority for the Agencies to
create exemptions by regulation. Accordingly, the Proposal recommended
removal of these regulatory exemptions.
The Agencies received only one comment on this provision. The
commenter supported removal of the Regulatory Standards and Management
Consignment exemptions. The Agencies find the removal of the exemptions
appropriate in light of their statutory repeal and therefore adopt this
provision as set forth in the Proposal without any changes.
D. General Exemptive Authority
Section 2210(c) of the EGRPR Act authorizes the Agencies to adopt
regulations permitting service by a management official that would
otherwise be prohibited by the Interlocks Act, if that official's
service would not result in ``a monopoly or substantial lessening of
competition.'' To implement this authority, the Agencies proposed to
exempt otherwise prohibited management interlocks where the dual
service would not result in a monopoly or substantial lessening of
competition, and would not otherwise threaten safety and soundness. As
noted in the preamble to the Proposal, the process for obtaining such
exemptions will be set out in each Agency's procedural regulations or,
in the case of the OCC, in the Management Interlocks booklet of the
Comptroller's Corporate Manual.
The Agencies also proposed to create a rebuttable presumption that
an interlock would not result in a monopoly or substantial lessening of
competition, if: (1) The depository organization primarily serves low-
or moderate-income areas; (2) the depository organization is controlled
or managed by members of a minority group or women; (3) the depository
institution has been chartered for less than two years; or (4) the
depository organization is deemed to be in a troubled condition'' under
regulations implementing section 914 of the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 1831i).
Under the proposal, interlocks granted in reliance on one of these
presumptions may continue for three years unless the Agency granting
the interlock provides otherwise in writing.
Three commenters supported the general exemption. One commenter
suggested that the rebuttable presumption be extended to depository
institutions that have been chartered for less than five years rather
than the two-year limit suggested in the Proposal. The commenter argued
that the time period should be extended to take into consideration the
challenges facing a de novo depository institution in its first or
second market cycle. Another commenter, however, cautioned against
allowing an interlock to continue when the original reason for granting
the interlock in the first place no longer applies. For example, the
commenter noted that if an interlock is granted to strengthen an
institution in a troubled condition and the bank is still in that
status at the end of the three-year time period, the appropriate
supervisory agency should consider other courses of action instead of
allowing the interlock to continue.
A fourth commenter stated that the justification offered by the
Agencies was insufficient to establish a rebuttable presumption for a
depository organization controlled or managed by members of a minority
group or women or for a newly chartered depository institution. The
commenter further questioned the reason for presuming that interlocks
in these conditions automatically would not result in a monopoly or
reduction of competition. The commenter argued that proper management
should be addressed in the chartering process and that the burden of
management oversight rests there. The commenter therefore recommended
that these two categories be dropped from the list of those eligible
for the rebuttable presumption.
In response, the Agencies note that when the regulatory exceptions
for these two categories of interlocks were created in 1979, the
Agencies found the exceptions were appropriate for the promotion of
competition over the long term and to encourage the development and
preservation of these depository organizations, thereby contributing to
the convenience and needs of the public and the well-being of the
financial community. The Agencies continue to believe that the
exception for a depository organization controlled or managed by
members of a minority group or women does not create an unfair
advantage but instead recognizes that it has historically been more
difficult for institutions controlled by women and minorities to
recruit seasoned management and that, accordingly, competition to serve
traditionally underserved markets may have suffered. By permitting
interlocks that improve the quality of management in minority and
women-owned institutions, the Agencies believe that these institutions
are better able to compete with other institutions in the relevant
market to serve traditionally underserved customers and markets.
Similarly, because de novo entrants into a market are presumed to
enhance competition in that market, the Agencies believe that an
interlock that improves the management of newly chartered institutions
also enhances competition.
For these reasons, the Agencies have retained the two categories of
rebuttable presumptions. As noted by the Agencies in the Proposal,
however, a claim that factors exist giving rise to a presumption does
not preclude an Agency from denying a request for an exemption if the
Agency finds that the interlock nevertheless would result in a monopoly
or substantial lessening of competition. See 63 FR 43054.
The Proposal stated that these presumptions would be applied in a
manner consistent with the Agencies' past analysis of the factors to
meet the legitimate needs of the institutions and organizations
involved for qualified and skilled management. The Proposal further
stated that the definitions of ``area median income'' and ``low-and
moderate-income areas'' added to the regulations in 1996 to implement
the CDRI Act amendments would be retained to provide guidance as to
when an organization would qualify for one of the presumptions. Under
the Proposal, interlocks based on a rebuttable presumption would be
allowed to continue for three years, unless otherwise provided in the
approval order. The Proposal would not prevent an organization from
applying for an extension of an interlock exemption if the factors
continued to apply. The organization would also be free under the
Proposal to utilize any other exemption that may be available. The
Agencies proposed that any interlock approved under this section may
continue so long as it would not result in a monopoly or a substantial
lessening of competition, becomes unsafe or unsound, or is subject to a
condition requiring termination at a specific time. The Agencies are
adopting the proposed section without any changes.
The Agencies also decline to extend the eligibility period for the
rebuttable
[[Page 51676]]
presumption to depository institutions that have been chartered for
less than five years rather than the two-year limit as suggested by
another commenter. The Agencies believe that extending the rebuttable
presumption to depository institutions that have been chartered for
less than five years would cause de novo depository organizations to
rely on interlocking service, rather than to obtain independent
management from other more appropriate sources. Once a de novo
depository institution is granted a general exemption, the exemption
would continue for a period of three years.
E. Small Market Share Exemption
The Proposal sought comment on an exemption for interlocks
involving institutions that, on a combined basis, control less than 20
percent of the deposits in a community or relevant MSA. The Agencies
proposed the small market share exemption to enlarge the pool of
management talent upon which depository institutions may draw, thereby
resulting in more competitive, better managed institutions without
causing significant anticompetitive effects. As stated in the Proposal,
financial institutions seeking to form an interlock pursuant to the
small market share exemption must determine their eligibility by using
deposit share data published by the FDIC in its Summary of Deposits.
All seven commenters supported the small market share exemption. In
addition, five commenters found the FDIC Summary of Deposits to be the
best available database for determining eligibility for the exception
(with the other two commenters expressing no opinion on this question).
Four commenters did not believe that institutions would abuse this
exception by developing webs of interlocking relationships (hub and
spoke interlocks). One of these four commenters urged the Agencies to
approach such interlocks on a case-by-case basis.
Four commenters stated that 20 percent of deposits was an
appropriate threshold to determine eligibility for the exception. One
commenter in this group recommended, however, that the Agencies
periodically reexamine the appropriateness of the 20 percent limit in
light of the declining market shares of banks generally. Another
commenter argued that the Agencies should increase the threshold to 30
percent due to a shortage of talent in some small towns. A second
commenter suggested that the Agencies adopt a higher percentage for
depository organizations in small communities. This commenter noted
that depository organizations in sparsely populated areas often control
a large share of deposits and that there would be no benefit in
depriving small or rural banks of eligibility for this exemption. Two
commenters suggested that credit union deposits should be taken into
account when ascertaining the total amount of deposits in a particular
community.
The Agencies agree with the majority of commenters that 20 percent
of deposits within the relevant community is the appropriate threshold
to determine eligibility for the small market share exemption. While
there will be highly concentrated markets where this threshold will not
affect institutions' ability to form interlocks, the Agencies believe
that interlocks between unaffiliated institutions that together control
more than 20 percent of the deposits in a market create the risk that
the interlocked institutions will be able to adversely affect the
availability or terms of credit in that market. The Agencies note,
however, that the rule permits institutions that do not qualify for the
small market share exemption to apply for a general exemption. The
general exemption is available even to institutions that control more
than 20 percent of the deposits in the relevant market if the
institutions are able to demonstrate that the interlock will not result
in a monopoly or substantial lessening of competition and would not
present safety and soundness concerns.
The Agencies do not agree with the commenters' suggestion of
including data on credit union deposits along with depository
institution deposits when determining the total amount of deposits in a
given market. The Agencies continue to believe 6 that the
deposit data maintained in the FDIC's Summary of Deposits, which does
not include credit union data, provides a reliable approximation of the
market for a given location. To the extent that credit unions hold a
significant amount of the total deposits in a given market, this
information may be used to demonstrate that an interlock will not
result in a monopoly or substantial lessening of competition under the
general exemption. This approach is consistent with the Agencies'
treatment of credit union deposits in the merger context, where the
Agencies consider credit union deposits as one of many mitigating
factors if a merger transaction exceeds a specified
threshold.7
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\6\ The Agencies' small market share exemption proposal in 1994
also did not include credit union deposit data in the determination
of the market.
\7\ The National Credit Union Administration in its proposed
rulemaking to revise its management interlocks regulation, however,
considers credit union deposits when determining the total amount of
deposits in a given market. See 63 FR 57947 (October 29, 1998).
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The small market share exemption criteria remain as outlined in the
Proposal. Organizations claiming the exemption must determine the
market share in each RMSA and community in which both depository
organizations (or their depository institution affiliates) have
offices. The relevant market used for the small market share exception
(that is, the RMSAs or communities in which both depository
organizations or their depository institution affiliates have offices)
are the same markets described in the community and RMSA prohibitions.
The small market share exemption is not available for interlocks
subject to the major assets prohibition.
The exemptions continue to apply as long as the organizations meet
the applicable conditions. Any event, such as an expansion or merger,
that causes the level of deposits controlled to exceed 20 percent of
deposits in any RMSA or community is considered a change in
circumstances. Accordingly, the depository organizations have 15 months
(or such shorter period as directed by the appropriate Agency) to
address the prohibited interlock. Conforming changes relating to
termination have been made to the Agencies' change of circumstances
provisions.
No prior Agency approval is required in order to claim the proposed
small market share exemption. Management is responsible for complying
with the terms of a small market share exemption and for maintaining
sufficient supporting documentation. Each depository organization must
maintain records sufficient to support its determination of eligibility
for the exemption and must reconfirm that determination on an annual
basis.
IV. Effective Date of Final Rule
Subject to certain exceptions, 12 U.S.C. 4802(b) provides that new
regulations and amendments to regulations prescribed by a federal
banking agency which impose additional reporting, disclosures, or other
new requirements on an insured depository institution shall take effect
on the first day of a calendar quarter which begins on or after the
date on which the regulations are published in final form. In addition,
the Administrative Procedure Act generally provides that rules will
become effective 30 days after publication. 5 U.S.C. 553. Accordingly,
compliance with the final rule is not mandatory until the effective
[[Page 51677]]
date provided earlier in this document. Section 4802(b), however, also
permits any person subject to the regulation to comply with the
regulation voluntarily, prior to the effective date. Consequently,
affected insured depository institutions may elect to comply
voluntarily with the final rule immediately. If an insured depository
institution or foreign bank elects to comply voluntarily with any
section of the management interlocks rules, the institution or bank
must comply with the entire part.
V. Paperwork Reduction Act
The Agencies may not conduct or sponsor, and an organization is not
required to respond to, an information collection unless it displays a
currently valid OMB control number. The OMB control numbers are listed
below.
OCC: 1557-0196
Board: 7100-0134
FDIC: 3604-0118
OTS: 1550-0051
The Agencies sought comment on the burden estimates for the
information collections listed below and received no comments that
specifically addressed the burden stemming from these information
collections.
OCC: The collection of information requirements contained in this
final rule have been approved by the Office of Management and Budget in
accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507).
Persons interested in commenting on these requirements should send
comments to the Office of Management and Budget, Paperwork Reduction
Project (1557-0196), Washington, D.C. 20503, with copies to the
Communications Division, Third Floor, Attention: 1557-0196, Office of
the Comptroller of the Currency, 250 E Street, SW, Washington, DC
20219.
The collection of information requirements in this final rule are
found in 12 CFR 26.4(h)(1)(i), 26.6(b), and 26.6(c). This information
is required to evidence compliance with the requirements of the
Interlocks Act by national banks and District banks.
Estimated average annual burden hours per respondent: 4 hours.
Estimated number of respondents: 7.
Estimated total annual reporting burden: 29 hours.
Start-up costs to correspondents: None.
Board: In accordance with section 3506 of the Paperwork Reduction
Act of 1995 (44 U.S.C. Ch. 35; 5 CFR 1320 Appendix A.1), the Board
reviewed the rule under the authority delegated to the Board by the
Office of Management and Budget.
The collection of information requirements in the final rule are
found in 12 CFR 212.4(h)(1)(i), 212.5(a)(2), 212.6(b), and 212.6(c).
This information is required to evidence compliance with the Interlocks
Act. The respondents are state member banks and subsidiary depository
institutions of bank holding companies (for-profit financial
institutions, including small businesses).
Estimated number of respondents: 6 applicants per year.
Estimated average annual burden per respondent: 4 hours.
Estimated annual frequency of reporting: One-time application.
Estimated total annual reporting burden: 24 hours.
Start-up costs to respondents: None.
The Board has a continued interest in the public's opinions of
Federal Reserve collections of information. At any time, comments
regarding the burden estimate, or any other aspect of this collection
of information, including suggestions for reducing the burden, may be
sent to: Secretary, Board of Governors of the Federal Reserve System,
20th and C Streets, N.W., Washington, DC 20551; and to the Office of
Management and Budget, Paperwork Reduction Project (7100-0134),
Washington, DC 20503.
FDIC: The collections of information contained in this final rule
have been reviewed and approved by the Office of Management and Budget
under control number 3604-0118 in accordance with the Paperwork
Reduction Act of 1995 (44 U.S.C. 3507). Comments on the collections of
information should be sent to the Office of Management and Budget,
Paperwork Reduction Project (3604-0118), Washington, D.C. 20503, with
copies of such comments to be sent to Steven F. Hanft, Office of the
Executive Secretary, Room F-453, Federal Deposit Insurance Corporation,
550 17th Street, NW., Washington, DC 20429.
OTS: The collection of information requirements in this rule have
been approved by the Office of Management and Budget in accordance with
the Paperwork Reduction Act of 1995 (44 U.S.C. 3507) under OMB control
number 1550-0051.
Persons interested in commenting on these requirements should send
comments to the Office of Management and Budget, Paperwork Reduction
Project (1550-0051), Washington, DC 20503, with copies to the
Regulations and Legislation Division, Chief Counsel's Office, Office of
Thrift Supervision, 1700 G St., NW., Washington, DC 20552.
Under the Paperwork Reduction Act of 1995, no persons are required
to respond to a collection of information unless it displays a
currently valid OMB control number. The valid OMB control number
assigned to the collection of information in this final rule is
displayed at 12 CFR 506.1.
The collection of information requirements are found in 12 CFR
563f.4(h)(1)(i), 563f.6(b) and 563f.6(c). OTS requires this information
to evidence compliance with the Management Interlocks Act by savings
associations. The likely respondents are savings associations and their
holding companies.
VI. Regulatory Flexibility Act
Pursuant to section 605(b) of the Regulatory Flexibility Act (RFA)
(5 U.S.C. 605(b)), the regulatory flexibility analysis otherwise
required under section 603 of the RFA (5 U.S.C. 603) is not required if
the head of the agency certifies that the rule will not have a
significant economic impact on a substantial number of small entities
and the agency publishes such certification and a statement explaining
the factual basis for such certification in the Federal Register along
with its final rule.
Pursuant to section 605(b) of the RFA, the Agencies hereby certify
that this rule will not have a significant economic impact on a
substantial number of small entities. The Agencies expect that this
rule will not create any additional burden on small entities. The rule
relaxes the criteria for obtaining an exemption from the interlocks
prohibitions, and specifically addresses the needs of small entities by
creating the small market share exemption. Accordingly, a regulatory
flexibility analysis is not required.
VII. Small Business Regulatory Enforcement Fairness Act
Title II of the Small Business Regulatory Enforcement Fairness Act
of 1996 (SBREFA) 8 provides generally for agencies to report
rules to Congress and the General Accounting Office for review. The
reporting requirement is triggered when a Federal agency issues a final
rule. The Agencies will file the appropriate reports with Congress and
the GAO as required by SBREFA. The Office of Management and Budget has
determined that the rules promulgated by the Agencies do not constitute
``major rules'' as defined by SBREFA.
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\8\ Pub. L. 104-121, 110 Stat. 857.
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[[Page 51678]]
VIII. Executive Order 12866
The OCC and OTS have determined that this Proposal is not a
significant regulatory action under Executive Order 12866.
IX. Unfunded Mandates Act of 1995
OCC and OTS: Section 202 of the Unfunded Mandates Act of 1995
(Unfunded Mandates Act) requires that an agency prepare a budgetary
impact statement before promulgating a rule likely to result in a
Federal mandate that may result in the annual expenditure of $100
million or more in any one year by State, local, and tribal
governments, in the aggregate, or by the private sector. If a budgetary
impact statement is required, section 205 of the Unfunded Mandates Act
requires an agency to identify and consider a reasonable number of
alternatives before promulgating the rule.
The OCC and OTS have determined that this final rule will not
result in expenditures by State, local, and tribal governments, or by
the private sector, of more than $100 million in any one year.
Accordingly, neither the OCC nor the OTS has prepared a budgetary
impact statement or specifically addressed the regulatory alternatives
considered.
X. Assessment of Impact of Federal Regulation on Families
The Agencies have determined that this amendment will not affect
family well-being within the meaning of section 654 of the Treasury
Department Appropriations Act, 1999, enacted as part of the Omnibus
Consolidated and Emergency Supplemental Appropriations Act, 1999 (Pub.
L. 105-277, 112 Stat. 2681).
List of Subjects
12 CFR Part 26
Antitrust, Banks, banking, Holding companies, Management official
interlocks, National banks, Reporting and recordkeeping requirements.
12 CFR Part 212
Antitrust, Banks, banking, Holding companies, Management official
interlocks, Reporting and recordkeeping requirements.
12 CFR Part 348
Antitrust, Banks, banking, Holding companies, Reporting and
recordkeeping requirements.
12 CFR Part 563f
Antitrust, Holding companies, Reporting and recordkeeping
requirements, Savings associations.
Office of the Comptroller of the Currency
12 CFR Chapter I
Authority and Issuance
For the reasons set out in the joint preamble, the OCC amends
chapter I of title 12 of the Code of Federal Regulations as follows:
PART 26--MANAGEMENT OFFICIAL INTERLOCKS
1. The authority citation for part 26 continues to read as follows:
Authority: 12 U.S.C. 93a and 3201-3208.
Sec. 26.2 [Amended]
2. Section 26.2 is amended by removing paragraphs (b) and (f) and
redesignating paragraphs (c) through (s) as paragraphs (b) through (q),
respectively.
3. Section 26.3 is amended by revising paragraph (c) to read as
follows:
Sec. 26.3 Prohibitions.
* * * * *
(c) Major assets. A management official of a depository
organization with total assets exceeding $2.5 billion (or any affiliate
of such an organization) may not serve at the same time as a management
official of an unaffiliated depository organization with total assets
exceeding $1.5 billion (or any affiliate of such an organization),
regardless of the location of the two depository organizations. The OCC
will adjust these thresholds, as necessary, based on the year-to-year
change in the average of the Consumer Price Index for the Urban Wage
Earners and Clerical Workers, not seasonally adjusted, with rounding to
the nearest $100 million. The OCC will announce the revised thresholds
by publishing a final rule without notice and comment in the Federal
Register.
4. Section 26.5 is revised to read as follows:
Sec. 26.5 Small market share exemption.
(a) Exemption. A management interlock that is prohibited by
Sec. 26.3 is permissible, if:
(1) The interlock is not prohibited by Sec. 26.3(c); and
(2) The depository organizations (and their depository institution
affiliates) hold, in the aggregate, no more than 20 percent of the
deposits in each RMSA or community in which both depository
organizations (or their depository institution affiliates) have
offices. The amount of deposits shall be determined by reference to the
most recent annual Summary of Deposits published by the FDIC for the
RMSA or community.
(b) Confirmation and records. Each depository organization must
maintain records sufficient to support its determination of eligibility
for the exemption under paragraph (a) of this section, and must
reconfirm that determination on an annual basis.
5. Section 26.6 is revised to read as follows:
Sec. 26.6 General exemption.
(a) Exemption. The OCC may by order issued following receipt of an
application, exempt an interlock from the prohibitions in Sec. 26.3 if
the OCC finds that the interlock would not result in a monopoly or
substantial lessening of competition and would not present safety and
soundness concerns.
(b) Presumptions. In reviewing an application for an exemption
under this section, the OCC will apply a rebuttable presumption that an
interlock will not result in a monopoly or substantial lessening of
competition if the depository organization seeking to add a management
official:
(1) Primarily serves low-and moderate-income areas;
(2) Is controlled or managed by persons who are members of a
minority group, or women;
(3) Is a depository institution that has been chartered for less
than two years; or
(4) Is deemed to be in ``troubled condition'' as defined in 12 CFR
5.51(c)(6).
(c) Duration. Unless a specific expiration period is provided in
the OCC approval, an exemption permitted by paragraph (a) of this
section may continue so long as it does not result in a monopoly or
substantial lessening of competition, or is unsafe or unsound. If the
OCC grants an interlock exemption in reliance upon a presumption under
paragraph (b) of this section, the interlock may continue for three
years, unless otherwise provided by the OCC in writing.
6. Section 26.7 is amended by revising paragraph (a) to read as
follows:
Sec. 26.7 Change in circumstances.
(a) Termination. A management official shall terminate his or her
service or apply for an exemption if a change in circumstances causes
the service to become prohibited. A change in circumstances may include
an increase in asset size of an organization, a change in the
delineation of the RMSA or community, the establishment of an office,
an increase in the aggregate deposits of the depository organization,
or an acquisition, merger, consolidation, or any reorganization of the
ownership structure of a depository organization
[[Page 51679]]
that causes a previously permissible interlock to become prohibited.
* * * * *
Dated: July 12, 1999.
John D. Hawke, Jr.,
Comptroller of the Currency.
Federal Reserve System
12 CFR Chapter II
Authority and Issuance
For the reasons set out in the joint preamble, the Board amends
chapter II of title 12 of the Code of Federal Regulations as follows:
PART 212--MANAGEMENT OFFICIAL INTERLOCKS
1. The authority citation for part 212 continues to read as
follows:
Authority: 12 U.S.C. and 3201-3208; 15 U.S.C. 19.
Sec. 212.2 [Amended]
2. Section 212.2 is amended by removing paragraphs (b) and (f) and
redesignating paragraphs (c) through (r) as paragraphs (b) through (p),
respectively.
3. Section 212.3 is amended by revising paragraphs (b) and (c) to
read as follows:
Sec. 212.3 Prohibitions.
* * * * *
(b) RMSA. A management official of a depository organization may
not serve at the same time as a management official of an unaffiliated
depository organization if the depository organizations in question (or
a depository institution affiliate thereof) have offices in the same
RMSA and, in the case of depository institutions, each depository
organization has total assets of $20 million or more.
(c) Major assets. A management official of a depository
organization with total assets exceeding $2.5 billion (or any affiliate
of such an organization) may not serve at the same time as a management
official of an unaffiliated depository organization with total assets
exceeding $1.5 billion (or any affiliate of such an organization),
regardless of the location of the two depository organizations. The
Board will adjust these thresholds, as necessary, based on the year-to-
year change in the average of the Consumer Price Index for the Urban
Wage Earners and Clerical Workers, not seasonally adjusted, with
rounding to the nearest $100 million. The Board will announce the
revised thresholds by publishing a final rule without notice and
comment in the Federal Register.
4. Section 212.5 is revised to read as follows:
Sec. 212.5 Small market share exemption.
(a) Exemption. A management interlock that is prohibited by
Sec. 212.3 is permissible, if:
(1) The interlock is not prohibited by Sec. 212.3(c); and
(2) The depository organizations (and their depository institution
affiliates) hold, in the aggregate, no more than 20 percent of the
deposits in each RMSA or community in which both depository
organizations (or their depository institution affiliates) have
offices. The amount of deposits shall be determined by reference to the
most recent annual Summary of Deposits published by the FDIC for the
RMSA or community.
(b) Confirmation and records. Each depository organization must
maintain records sufficient to support its determination of eligibility
for the exemption under paragraph (a) of this section, and must
reconfirm that determination on an annual basis.
5. Section 212.6 is revised to read as follows:
Sec. 212.6 General exemption.
(a) Exemption. The Board may, by agency order, exempt an interlock
from the prohibitions in Sec. 212.3, if the Board finds that the
interlock would not result in a monopoly or substantial lessening of
competition, and would not present safety and soundness concerns.
(b) Presumptions. In reviewing an application for an exemption
under this section, the Board will apply a rebuttable presumption that
an interlock will not result in a monopoly or substantial lessening of
competition if the depository organization seeking to add a management
official:
(1) Primarily serves low- and moderate-income areas;
(2) Is controlled or managed by persons who are members of a
minority group, or women;
(3) Is a depository institution that has been chartered for less
than two years; or
(4) Is deemed to be in ``troubled condition'' as defined in 12 CFR
225.71.
(c) Duration. Unless a shorter expiration period is provided in the
Board approval, an exemption permitted by paragraph (a) of this section
may continue so long as it does not result in a monopoly or substantial
lessening of competition, or is unsafe or unsound. If the Board grants
an interlock exemption in reliance upon a presumption under paragraph
(b) of this section, the interlock may continue for three years, unless
otherwise provided by the Board in writing.
6. Section 212.7 is amended by revising paragraph (a) to read as
follows:
Sec. 212.7 Change in circumstances.
(a) Termination. A management official shall terminate his or her
service or apply for an exemption if a change in circumstances causes
the service to become prohibited. A change in circumstances may include
an increase in asset size of an organization, a change in the
delineation of the RMSA or community, the establishment of an office,
an increase in the aggregate deposits of the depository organization,
or an acquisition, merger, consolidation, or reorganization of the
ownership structure of a depository organization that causes a
previously permissible interlock to become prohibited.
* * * * *
By order of the Board of Governors of the Federal Reserve
System.
Dated at Washington, DC, this 13th day of September, 1999.
Board of Governors of the Federal Reserve System.
Jennifer J. Johnson,
Secretary of the Board.
Federal Deposit Insurance Corporation
12 CFR Chapter III
Authority and Issuance
For the reasons set forth in the joint preamble, the Board of
Directors of the FDIC amends chapter III of title 12 of the Code of
Federal Regulations as follows:
PART 348--MANAGEMENT OFFICIAL INTERLOCKS
1. The authority citation for part 348 continues to read as
follows:
Authority: 12 U.S.C. 1823(k), 3207.
Sec. 348.2 [Amended]
2. Section 348.2 is amended by removing paragraphs (b) and (f) and
redesignating paragraphs (c) through (r) as paragraphs (b) through (p),
respectively.
3. Section 348.3 is amended by revising paragraph (c) to read as
follows:
Sec. 348.3 Prohibitions.
* * * * *
(c) Major assets. A management official of a depository
organization with total assets exceeding $2.5 billion (or any affiliate
of such an organization) may not serve at the same time as a management
official of an unaffiliated depository organization with total assets
exceeding $1.5 billion (or any affiliate of such an organization),
regardless of the location of the two depository organizations. The
FDIC will adjust these thresholds, as necessary, based on the year-to-
year change in the average of the Consumer Price Index for the Urban
[[Page 51680]]
Wage Earners and Clerical Workers, not seasonally adjusted, with
rounding to the nearest $100 million. The FDIC will announce the
revised thresholds by publishing a final rule without notice and
comment in the Federal Register.
4. Section 348.5 is revised to read as follows:
Sec. 348.5 Small market share exemption.
(a) Exemption. A management interlock that is prohibited by
Sec. 348.3 is permissible, if:
(1) The interlock is not prohibited by Sec. 348.3(c); and
(2) The depository organizations (and their depository institution
affiliates) hold, in the aggregate, no more than 20 percent of the
deposits in each RMSA or community in which both depository
organizations (or their depository institution affiliates) have
offices. The amount of deposits shall be determined by reference to the
most recent annual Summary of Deposits published by the FDIC for the
RMSA or community.
(b) Confirmation and records. Each depository organization must
maintain records sufficient to support its determination of eligibility
for the exemption under paragraph (a) of this section, and must
reconfirm that determination on an annual basis.
5. Section 348.6 is revised to read as follows:
Sec. 348.6 General exemption.
(a) Exemption. The FDIC may by agency order exempt an interlock
from the prohibitions in Sec. 348.3 if the FDIC finds that the
interlock would not result in a monopoly or substantial lessening of
competition and would not present safety and soundness concerns.
(b) Presumptions. In reviewing an application for an exemption
under this section, the FDIC will apply a rebuttable presumption that
an interlock will not result in a monopoly or substantial lessening of
competition if the depository organization seeking to add a management
official:
(1) Primarily serves low-and moderate-income areas;
(2) Is controlled or managed by persons who are members of a
minority group, or women;
(3) Is a depository institution that has been chartered for less
than two years; or
(4) Is deemed to be in ``troubled condition'' as defined in
Sec. 303.101(c).
(c) Duration. Unless a shorter expiration period is provided in the
FDIC approval, an exemption permitted by paragraph (a) of this section
may continue so long as it does not result in a monopoly or substantial
lessening of competition, or is unsafe or unsound. If the FDIC grants
an interlock exemption in reliance upon a presumption under paragraph
(b) of this section, the interlock may continue for three years, unless
otherwise provided by the FDIC in writing.
(d) Procedures. Procedures for applying for an exemption under this
section are set forth in 12 CFR 303.250.
6. Section 348.7 is amended by revising paragraph (a) to read as
follows:
Sec. 348.7 Change in circumstances.
(a) Termination. A management official shall terminate his or her
service or apply for an exemption if a change in circumstances causes
the service to become prohibited. A change in circumstances may include
an increase in asset size of an organization, a change in the
delineation of the RMSA or community, the establishment of an office,
an increase in the aggregate deposits of the depository organization,
or an acquisition, merger, consolidation, or reorganization of the
ownership structure of a depository organization that causes a
previously permissible interlock to become prohibited.
* * * * *
By order of the Board of Directors.
Dated at Washington, DC, this 31st day of August, 1999.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
Office of Thrift Supervision
12 CFR Chapter V
Authority and Issuance
For the reasons set out in the joint preamble, the OTS amends
chapter V of title 12 of the Code of Federal Regulations as follows:
PART 563f--MANAGEMENT OFFICIAL INTERLOCKS
1. The authority citation for part 563f continues to read as
follows:
Authority: 12 U.S.C. 3201-3208.
Sec. 563f.2 [Amended]
2. Section 563f.2 is amended by removing paragraphs (b) and (f) and
redesignating paragraphs (c) through (s) as paragraphs (b) through (q),
respectively.
3. Section 563f.3 is amended by revising paragraph (c) to read as
follows:
Sec. 563f.3 Prohibitions.
* * * * *
(c) Major assets. A management official of a depository
organization with total assets exceeding $2.5 billion (or any affiliate
of such an organization) may not serve at the same time as a management
official of an unaffiliated depository organization with total assets
exceeding $1.5 billion (or any affiliate of such an organization),
regardless of the location of the two depository organizations. The OTS
will adjust these thresholds, as necessary, based on the year-to-year
change in the average of the Consumer Price Index for the Urban Wage
Earners and Clerical Workers, not seasonally adjusted, with rounding to
the nearest $100 million. The OTS will announce the revised thresholds
by publishing a final rule without notice and comment in the Federal
Register.
4. Section 563f.5 is revised to read as follows:
Sec. 563f.5 Small market share exemption.
(a) Exemption. A management interlock that is prohibited by
Sec. 563f.3 is permissible, if:
(1) The interlock is not prohibited by Sec. 563f.3(c); and
(2) The depository organizations (and their depository institution
affiliates) hold, in the aggregate, no more than 20 percent of the
deposits in each RMSA or community in which both depository
organizations (or their depository institution affiliates) have
offices. The amount of deposits shall be determined by reference to the
most recent annual Summary of Deposits published by the FDIC for the
RMSA or community.
(b) Confirmation and records. Each depository organization must
maintain records sufficient to support its determination of eligibility
for the exemption under paragraph (a) of this section, and must
reconfirm that determination on an annual basis.
5. Section 563f.6 is revised to read as follows:
Sec. 563f.6 General exemption.
(a) Exemption. The OTS may by agency order exempt an interlock from
the prohibitions in Sec. 563f.3 if the OTS finds that the interlock
would not result in a monopoly or substantial lessening of competition
and would not present safety and soundness concerns. A depository
organization may apply to the OTS for an exemption as provided by
Sec. 516.2 of this chapter.
(b) Presumptions. In reviewing an application for an exemption
under this section, the OTS will apply a rebuttable presumption that an
interlock will not result in a monopoly or substantial lessening of
competition if the depository organization seeking to add a management
official:
(1) Primarily serves low- and moderate-income areas;
(2) Is controlled or managed by persons who are members of a
minority group, or women;
[[Page 51681]]
(3) Is a depository institution that or has been chartered for less
than two years; or
(4) Is deemed to be in ``troubled condition'' as defined in
Sec. 563.555 of this chapter.
(c) Duration. Unless a shorter expiration period is provided in the
OTS approval, an exemption permitted by paragraph (a) of this section
may continue so long as it does not result in a monopoly or substantial
lessening of competition, or is unsafe or unsound. If the OTS grants an
interlock exemption in reliance upon a presumption under paragraph (b)
of this section, the interlock may continue for three years, unless
otherwise provided by the OTS in writing.
6. Section 563f.7 is amended by revising paragraph (a) to read as
follows:
Sec. 563f.7 Change in circumstances.
(a) Termination. A management official shall terminate his or her
service or apply for an exemption if a change in circumstances causes
the service to become prohibited. A change in circumstances may include
an increase in asset size of an organization, a change in the
delineation of the RMSA or community, the establishment of an office,
an increase in the aggregate deposits of the depository organization,
or an acquisition, merger, consolidation, or reorganization of the
ownership structure of a depository organization that causes a
previously permissible interlock to become prohibited.
* * * * *
Dated: June 30, 1999.
Ellen Seidman,
Director.
[FR Doc. 99-24881 Filed 9-23-99; 8:45 am]
BILLING CODE 4810-33-P, 6210-01-P, 6714-01-P, 6720-01-P