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4000 - Advisory Opinions
Management Official Interlocks--Excepted Service
FDIC-84-5
February 10, 1984
Pamela E. F. LeCren, Senior Attorney
The following is in response to your request for the Legal
Division's comments and opinion regarding the captioned request for an
exception from the prohibitions of the Management Official Interlocks
Act ("Interlocks Act." 12 U.S.C. 3201 et seq.) under
section 348.4(b)(1)(ii) of FDIC's regulations. Section 348.4(b)(1)(ii)
of FDIC's regulations permits an otherwise prohibited interlock between
two depository organizations where one of the depository organizations
is managed or controlled by members of a minority group and the
individual's service in question is necessary to provide the minority
depository organization with management or operating expertise. The
excepted service may not continue for more than five years.
The instant application can be characterized as a "reverse
exception request" in that
* * *, 1
is requesting that * * *, currently a director of * * * * * *
(successor to * * *, a "long-term problem minority bank") be
permitted to stand for election as a director of the
* * *. 2
We use the term "reverse exception request" inasmuch as * * *
is presently serving a minority bank and wishes to serve a bank holding
company that is neither controlled or
{{4-28-89 p.4148}}managed by members of a minority group
nor falls into any of the other situations for which exceptions are
available. 3
The Legal Division in commenting upon an earlier "reverse
exception request" 4
concluded that the exception could be available despite the fact that
the individual in question is already serving the institution that the
exception was designed to benefit. Whether or not the exception is
available depends upon three things: (1) whether the individual in
question does in fact provide, in this case, the minority bank with
management or operating expertise, (2) whether the institution could
replace the individual with someone equally suited to provide such
management or operating expertise without utilizing the services of
someone whose service would be unlawful under the Interlocks Act if the
individual terminates his/her service with the minority institution,
and (3) is there any indication that the individual will in fact
terminate his/her service with the institution if the exception request
is denied.
Based upon a reading of Regional Director Halverson's January 27,
1984 memorandum, we feel that all three questions can be resolved
favorably and that the exception is therefor available in the
discretion of the Board of Directors. 5
1 * * * is a registered multi-bank holding company whose lead
bank, * * *, is located in * * *. Go Back to Text
2 A management official interlock between * * * and * * *
would be prohibited under section 348.3(a)(3) of FDIC's regulations as
amended effective November 30, 1983 (48 Fed. Reg. 50296). Go Back to Text
3 Institutions located in low income or economically depressed
areas, newly chartered institutions, institutions facing conditions
endangering safety and soundness, and institutions facing disruptive
loss of management officials due to a change in circumstances are all
eligible for limited exceptions from the prohibitions of the Interlocks
Act. Go Back to Text
4 See Legal Division's July 14, 1980 memorandum to * * *,
review section chief, concerning a request under the newly-chartered
bank exception from * * *. Go Back to Text
5 According to Regional Director Halverson's memorandum,
* * * * * * has benefited from * * * service and the continued
existence of the bank whose predecessor, * * * failed in 1982 is
"in part attributable to * * * efforts and commitment to the
future of this minority institution." The bank is described as
benefiting from * * * extensive business background, his many civic
and charitable affiliations, and the continuity of management his
service provides. (* * * had been a director of the bank's
predecessor.) The regional office anticipates that * * * will resign
his position at * * * if the exception request is denied. Although
Regional Director Halverson's memorandum does not specifically address
whether or not another individual could equally service the bank's
needs without running afoul of the Interlocks Act, we surmise that it
could prove difficult to attract management to the bank because of its
past history and recent internal control battles and furthermore, that
because of the bank's location, it could prove difficult to find
management not already serving another depository institution. Go Back to Text
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