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FDIC Law, Regulations, Related Acts

[Main Tabs]     [Table of Contents - 4000]     [Index]     [Previous Page]     [Next Page]     [Search] 4000 - Advisory Opinions Director Interlock Between Nondepository Subsidiary of Diversified Savings and Loan Holding Company and Unaffiliated Depository Institution or Depository Institution Holding Company FDIC-90-32 August 2, 1990 Douglas H. Jones, Deputy General Counsel   You have requested that the FDIC reconsider an opinion issued by ***, dated March 13, 1990 concerning the interpretation of section 205(8) of the Depository Institution Management Interlocks Act ("Interlocks Act", 12 U.S.C. §3204 et. seq.) as added to the Interlocks Act by the Management Interlocks Revision Act of 1988 ("Revisions Act", Pub. L. 100-650). The opinion was issued in connection with a notice filed pursuant to section 205(8) that Mr. ***, an outside director of *** intended to serve as an outside director of *** is a subsidiary of ***, a diversified savings and loan holding company. *** does not itself own any depository institution subsidiaries.   Section 205(8) provides in relevant part that the prohibitions of the Interlocks Act shall not apply to a diversified savings and loan holding company with respect to the service of a director of such a company who is also a director of any nonaffiliated depository institution or depository holding company provided that the appropriate federal institution supervisory agency is given 60 days advance notice of the proposed interlock and the agency does not object to the dual service based upon the grounds set forth in the statute prior to the expiration of the 60-day notice period. *** concluded that the exception contained in section 205(8) is only available if the proposed director interlock is at the diversified savings and loan holding company level, i.e., the exception does not extend to director interlocks involving subsidiaries of diversified savings and loan holding companies. In your opinion, *** conclusion is incorrect, the correct posture being that section 205(8) is available for any director interlock involving a diversified savings and loan holding company or any nondepository institution subsidiary of a diversified savings and loan holding company.   It is our conclusion, upon reviewing your letter, the relevant language of the Interlocks Act, and the legislative history of the Revisions Act, that the exception in section 205(8) can be read to extend to the service of a director at a subsidiary of a diversified savings and loan holding company and an unaffiliated depository institution or depository holding company provided that the subsidiary is not itself a depository institution nor owns a depository institution. The basis for our conclusion is set out more fully below.   Section 205 provides certain exceptions to the prohibitions of the Interlocks Act. The introductory language to section 205 states that: {{10-15-90 p.4465}}   The prohibitions contained in sections 3202 and 3203 of this title shall not apply in the case of any one or more of the following or subsidiary thereof:[emphasis added].   The paragraphs which follow list a number of organizations by type. One could easily conclude, based upon the reference in the introductory language to subsidiaries, that the prohibitions of the Interlocks Act do not apply to any organization contained on the list, or to any subsidiary of a listed organization. Paragraph (8) of section 205, however, does not simply list diversified savings and loan holding companies. It provides that the prohibitions of the Interlocks Act shall not apply in the case of a diversified savings and loan holding with respect to the service of a director of such a company who is also a director of any nonaffiliated depository institution or depository holding company. As the effect of this limiting language on the construction of section 205, and section 205(8) in particular, is capable of differing interpretations, we reviewed the legislative history of the Revisions Act for guidance.   Although there is little in the way of legislative history concerning section 205(8), one statement by Rep. St Germain touches on the issue of subsidiaries of diversified savings and loan holding companies. Mr. St Germain indicated that, "A director of an unaffiliated depository institution or holding company may also serve as a director of the diversified holding company but not as director of the holding company's subsidiary depository institution." (134 Cong. Rec. H9796, daily ed. October 6, 1988). Therefore, despite the introductory language found in section 205 regarding subsidiaries, there was a clear intent that section 205(8) not allow an individual to sit as a director of a depository institution subsidiary of a diversified savings and loan holding company and another unaffiliated depository institution or depository holding company.   As Mr. St Germain's statement only addresses the issue of service at a depository institution subsidiary, it does not necessarily resolve the issue of whether service would be permitted under the exception at a subsidiary that is not a depository institution nor owns a depository institution. We can see no strong policy purpose to be served, however, by limiting the reach of section 205(8) to the diversified savings and loan holding company and not allowing service at such subsidiaries. We therefore conclude that section 205(8) should be read in conjunction with the introductory language of section 205 so as to allow (assuming the appropriate agency does not object) a director interlock between a diversified savings and loan holding company, or any of its subsidiaries that are not depository institutions nor own depository institutions, and an unaffiliated depository institution or depository holding company.   As we have come to the above conclusion, you are free to proceed under section 205(8) and resubmit to the *** on behalf of your client notice of his intent to establish an interlock. Upon receipt, the notice will be processed by the regional office and a recommendation formulated as to approval or disapproval which will then be forwarded to Washington. [Main Tabs]     [Table of Contents - 4000]     [Index]     [Previous Page]     [Next Page]     [Search]

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