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4000 - Advisory Opinions
Definition of "Affiliate" Under the Depository
Institutions Management Interlocks Act
FDIC-79-12
November 7, 1979
Pamela E. F. LeCren, Attorney
You have requested an opinion from the FDIC on whether or not ***
and *** are affiliated under the Depository Institution Management
Interlocks Act (Title II of FIRIRCA). That Act prohibits nonaffiliated
financial institutions from sharing management officials. If the two
institutions are affiliated, the prohibitions of the Act do not apply
and they may freely share management officials.
Section 202(3) of the Act defines affiliated institutions to
be, among other things, two institutions that are commonly owned;
i.e., two institutions of which more than fifty percent of
the stock of each is beneficially owned by the same person or group of
persons. 1
According to the information presented to us in your letter, *** is a
subsidiary of ***, a one bank holding company. *** is a subsidiary of
***, a one bank holding company. Fifty-five
{{4-28-89 p.4030}}percent of *** stock is held by ***.
Eighty-three percent of *** stock is held by ***. *** and *** are in
turn both controlled by members of the ***
family. 2
In short, the two banks, although subsidiaries of two separate bank
holding companies, are controlled by the same group of persons (albeit
through the bank holding companies).
It is our opinion, that for the purposes of the Depository
Institution Management Interlocks Act (and its regulations), beneficial
ownership of stock in a bank holding company can be traced through the
holding company to the subsidiary. Thus, in this particular instance,
because *** owns more than fifty percent of the stock of *** and the
*** family owns one-hundred percent of the stock in ***, a group of
persons (the *** family) owns more than fifty percent of the stock of
***. Futhermore, because more than fifty percent of the stock of *** is
owned by ***, the majority of the stock of which is in turn owned by
the *** family, the same group of persons can be said to beneficially
own more than fifty percent of the stock of both *** and ***. In brief,
*** and *** are, in our opinion, affiliated for the purposes of the
Depository Institution Management Interlocks Act.
If you have any questions regarding the substance of this opinion or
the Depository Institution Management Interlocks Act in general, please
contact me.
1 Section 348.2(b) of the final regulations implementing Title
II (12 C.F.R. Part 348) interprets the statutory definition of
affiliate so as to deal with sham affiliations. The considerations
raised by that section are not relevant under the facts presented
here. Go Back to Text
2 One-hundred percent of the outstanding shares of *** are held
by the *** family and over eighty-nine percent of the shares of *** are
so held. Go Back to Text
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