67424 Federal Register / Vol. 60, No. 250 / Friday, December 29, 1995 / Proposed Rules
1 The National Credit Union Administration has
participated in the interagency effort to revise the
management interlocks regulations and intends to
publish a separate Notice of Proposed Rulemaking
revising 12 CFR part 711 in the near future.
2 The agencies completed their review of requests
for extensions by March 23, 1995, as directed by the
statute. Therefore, the provision regarding
extending the grandfather period is moot for
purposes of this regulation.
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the
Currency
12 CFR Part 26
[Docket No. 95–31]
RIN 1557–AB39
FEDERAL RESERVE BOARD
12 CFR Part 212
[Docket No. R–0907]
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 348
RIN 3064–AB71
DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
12 CFR Part 563f
[Docket No. 95–204]
RIN 1150–AA95
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 notice of proposed
rulemaking.
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)
(collectively, the agencies) propose to
revise their rules regarding management
interlocks. The proposal conforms the
interlocks rules to recent statutory
changes, modernizes and clarifies the
rules, and reduces unnecessary
regulatory burdens where feasible,
consistent with statutory requirements.
DATES: Comments must be received by
February 27, 1996.
ADDRESSES: Comments should be
directed to:
OCC: Office of the Comptroller of the
Currency, Communications Division,
250 E Street, SW, Washington, DC
20219, Attention: Docket No. 95–31.
Comments will be available for public
inspection and photocopying at the
same location. In addition, comments
may be sent by facsimile transmission to
FAX number (202) 874–5274 or by
internet mail to
REG.COMMENTS@OCC.TREAS.GOV.
Board: William W. Wiles, Secretary,
Board of Governors of the Federal
Reserve System, Docket No. R–0907,
20th Street and Constitution Avenue,
NW, Washington, DC 20551. Comments
addressed to Mr. Wiles may also be
delivered to the Board’s mail room
between 8:45 a.m. and 5:15 p.m., and to
the security control room outside of
those hours. Both the mail room and
control room are accessible from the
courtyard entrance on 20th Street
between Constitution Avenue and C
Street, NW. Comments may be
inspected in room MP–500 between
9:00 a.m. and 5:00 p.m., except as
provided in § 261.8 of the Board’s Rules
Regarding Availability of Information,
12 CFR 261.8.
FDIC: Jerry L. Langley, Executive
Secretary, Attention: Room F–402,
Federal Deposit Insurance Corporation,
550 17th Street, NW, Washington, DC
20429. Comments may be delivered to
room F–400, 1776 F Street, NW,
Washington, DC 20429, on business
days between 8:30 a.m. and 5:00 p.m. or
sent by facsimile transmission to FAX
number 202/898–3838. Internet:
COMMENTS@FDIC.GOV. Comments
will be available for inspection and
photocopying in room 7118, 550 17th
Street, NW, Washington, DC 20429,
between 8:30 a.m. and 5:00 p.m. on
business days.
OTS: Chief, Dissemination Branch,
Records Management and Information
Policy, Office of Thrift Supervision,
1700 G Street, NW, Washington, DC
20552, Attention Docket No. 95–204.
These submissions may be hand
delivered to 1700 G Street, NW, from
9:00 A.M. to 5:00 P.M. on business days;
they may be sent by facsimile
transmission to FAX number (202) 906–
7755. Comments over 25 pages in length
should be sent to FAX number (202)
906–6956. Comments will be available
for inspection at 1700 G Street, NW,
from 9:00 A.M. until 4:00 P.M. on
business days.
FOR FURTHER INFORMATION CONTACT:
OCC: Sue E. Auerbach, Senior
Attorney, Bank Activities and Structure
Division (202) 874–5300; Emily R.
McNaughton, National Bank Examiner,
Credit & Management Policy (202) 874–
5170; Jackie Durham, Senior Licensing
Policy Analyst (202) 874–5060; or Mark
J. Tenhundfeld, Senior Attorney,
Legislative and Regulatory Activities
(202) 874–5090.
Board: Thomas M. Corsi, Senior
Attorney (202/452–3275), or Tina Woo,
Attorney (202/452–3890), Legal
Division, Board of Governors of the
Federal Reserve System. For the hearing
impaired only, Telecommunication
Device for Deaf (TTD), 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, (202)
906–6461; or Donna Miller, Program
Manager, Supervision Policy, (202) 906–
7488.
SUPPLEMENTARY INFORMATION:
Background
Section 303 of the Riegle Community
Development and Regulatory
Improvement Act of 1994 (CDRI Act)
Section 303(a) of the CDRI Act (12
U.S.C. 4803(a)) requires the OCC, OTS,
Board, and FDIC to review their
regulations in order to streamline and
modify the regulations to improve
efficiency, reduce unnecessary costs,
and eliminate unwarranted constraints
on credit availability. Section 303(a)
also requires the agencies to work
jointly to make uniform all regulations
and guidelines implementing common
statutory or supervisory policies. The
agencies have reviewed their respective
management interlocks regulation with
these purposes in mind and, as is
explained in greater detail in the text
that follows, propose to amend the
regulations in ways designed to meet
the goals of section 303(a).1
Summary of Statutory Changes
The CDRI Act amended the
Depository Institution Management
Interlocks Act (12 U.S.C. 3201–3208)
(Interlocks Act) by removing the
agencies’ broad authority to exempt
otherwise impermissible interlocks and
replacing it with the authority to exempt
interlocks under more narrow
circumstances. The CDRI Act also
required a depository organization with
a ‘‘grandfathered’’ interlock to apply for
an extension of the grandfather period if
the organization wanted to keep the
interlock in place.2
1 The National Credit Union Administration has
participated in the interagency effort to revise the
management interlocks regulations and intends to
publish a separate Notice of Proposed Rulemaking
revising 12 CFR part 711 in the near future.
2 The agencies completed their review of requests
for extensions by March 23, 1995, as directed by the
statute. Therefore, the provision regarding
extending the grandfather period is moot for
purposes of this regulation.
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the
Currency
12 CFR Part 26
[Docket No. 95–31]
RIN 1557–AB39
FEDERAL RESERVE BOARD
12 CFR Part 212
[Docket No. R–0907]
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 348
RIN 3064–AB71
DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
12 CFR Part 563f
[Docket No. 95–204]
RIN 1150–AA95
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 notice of proposed
rulemaking.
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)
(collectively, the agencies) propose to
revise their rules regarding management
interlocks. The proposal conforms the
interlocks rules to recent statutory
changes, modernizes and clarifies the
rules, and reduces unnecessary
regulatory burdens where feasible,
consistent with statutory requirements.
DATES: Comments must be received by
February 27, 1996.
ADDRESSES: Comments should be
directed to:
OCC: Office of the Comptroller of the
Currency, Communications Division,
250 E Street, SW, Washington, DC
20219, Attention: Docket No. 95–31.
Comments will be available for public
inspection and photocopying at the
same location. In addition, comments
may be sent by facsimile transmission to
FAX number (202) 874–5274 or by
internet mail to
REG.COMMENTS@OCC.TREAS.GOV.
Board: William W. Wiles, Secretary,
Board of Governors of the Federal
Reserve System, Docket No. R–0907,
20th Street and Constitution Avenue,
NW, Washington, DC 20551. Comments
addressed to Mr. Wiles may also be
delivered to the Board’s mail room
between 8:45 a.m. and 5:15 p.m., and to
the security control room outside of
those hours. Both the mail room and
control room are accessible from the
courtyard entrance on 20th Street
between Constitution Avenue and C
Street, NW. Comments may be
inspected in room MP–500 between
9:00 a.m. and 5:00 p.m., except as
provided in § 261.8 of the Board’s Rules
Regarding Availability of Information,
12 CFR 261.8.
FDIC: Jerry L. Langley, Executive
Secretary, Attention: Room F–402,
Federal Deposit Insurance Corporation,
550 17th Street, NW, Washington, DC
20429. Comments may be delivered to
room F–400, 1776 F Street, NW,
Washington, DC 20429, on business
days between 8:30 a.m. and 5:00 p.m. or
sent by facsimile transmission to FAX
number 202/898–3838. Internet:
COMMENTS@FDIC.GOV. Comments
will be available for inspection and
photocopying in room 7118, 550 17th
Street, NW, Washington, DC 20429,
between 8:30 a.m. and 5:00 p.m. on
business days.
OTS: Chief, Dissemination Branch,
Records Management and Information
Policy, Office of Thrift Supervision,
1700 G Street, NW, Washington, DC
20552, Attention Docket No. 95–204.
These submissions may be hand
delivered to 1700 G Street, NW, from
9:00 A.M. to 5:00 P.M. on business days;
they may be sent by facsimile
transmission to FAX number (202) 906–
7755. Comments over 25 pages in length
should be sent to FAX number (202)
906–6956. Comments will be available
for inspection at 1700 G Street, NW,
from 9:00 A.M. until 4:00 P.M. on
business days.
FOR FURTHER INFORMATION CONTACT:
OCC: Sue E. Auerbach, Senior
Attorney, Bank Activities and Structure
Division (202) 874–5300; Emily R.
McNaughton, National Bank Examiner,
Credit & Management Policy (202) 874–
5170; Jackie Durham, Senior Licensing
Policy Analyst (202) 874–5060; or Mark
J. Tenhundfeld, Senior Attorney,
Legislative and Regulatory Activities
(202) 874–5090.
Board: Thomas M. Corsi, Senior
Attorney (202/452–3275), or Tina Woo,
Attorney (202/452–3890), Legal
Division, Board of Governors of the
Federal Reserve System. For the hearing
impaired only, Telecommunication
Device for Deaf (TTD), 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, (202)
906–6461; or Donna Miller, Program
Manager, Supervision Policy, (202) 906–
7488.
SUPPLEMENTARY INFORMATION:
Background
Section 303 of the Riegle Community
Development and Regulatory
Improvement Act of 1994 (CDRI Act)
Section 303(a) of the CDRI Act (12
U.S.C. 4803(a)) requires the OCC, OTS,
Board, and FDIC to review their
regulations in order to streamline and
modify the regulations to improve
efficiency, reduce unnecessary costs,
and eliminate unwarranted constraints
on credit availability. Section 303(a)
also requires the agencies to work
jointly to make uniform all regulations
and guidelines implementing common
statutory or supervisory policies. The
agencies have reviewed their respective
management interlocks regulation with
these purposes in mind and, as is
explained in greater detail in the text
that follows, propose to amend the
regulations in ways designed to meet
the goals of section 303(a).1
Summary of Statutory Changes
The CDRI Act amended the
Depository Institution Management
Interlocks Act (12 U.S.C. 3201–3208)
(Interlocks Act) by removing the
agencies’ broad authority to exempt
otherwise impermissible interlocks and
replacing it with the authority to exempt
interlocks under more narrow
circumstances. The CDRI Act also
required a depository organization with
a ‘‘grandfathered’’ interlock to apply for
an extension of the grandfather period if
the organization wanted to keep the
interlock in place.2
67425Federal Register / Vol. 60, No. 250 / Friday, December 29, 1995 / Proposed Rules
After the changes made by the CDRI
Act, a person subject to the Interlocks
Act’s restrictions seeking an exemption
from those restrictions must qualify
either for a ‘‘regulatory standards’’
exemption (the Regulatory Standards
exemption) or an exemption under a
‘‘management official consignment
program’’ (the Management
Consignment exemption). An applicant
seeking a Regulatory Standards
exemption must submit a board
resolution certifying that no other
candidate from the relevant community
has the necessary expertise to serve as
a management official, is willing to
serve, and is not otherwise prohibited
by the Interlocks Act from serving.
Before granting the exemption request,
the appropriate agency must find that
the individual is critical to the
institution’s safe and sound operations,
that the interlock will not produce an
anticompetitive effect, and that the
management official meets any
additional requirements imposed by the
agency. Under the Management
Consignment exemption, the
appropriate agency may permit an
interlock that otherwise would be
prohibited by the Interlocks Act if the
agency determines that the interlock
would improve the provision of credit
to low- and moderate-income areas,
increase the competitive position of a
minority- or woman-owned institution,
or strengthen the management of a
newly chartered institution or an
institution that is in an unsafe or
unsound condition. (See text following
‘‘Management Consignment exemption’’
in this Preamble for a discussion
regarding interlocks involving newly
chartered institutions or institutions
that are in an unsafe or unsound
condition.)
The proposal reflects these statutory
changes, and streamlines and clarifies
the interlocks regulations in various
respects. These changes are discussed in
the text that follows. The agencies invite
comments on all aspects of this
proposal.
Discussion
The following is a section-by-section
discussion of the proposed revisions.
Authority, Purpose, and Scope
This section in the agencies’ current
regulations identifies the Interlocks Act
as the statutory authority for the
management interlocks regulation. It
also states that the purpose of the rules
governing management interlocks is to
foster competition between unaffiliated
institutions. Finally, this section
currently identifies the types of
institutions to which each agency’s
regulation applies.
The proposed rule restates these
provisions and, in the OCC proposed
rule, uses the term ‘‘District bank’’ to
describe banks operating under the
Code of Laws of the District of
Columbia. (See definition of ‘‘District
bank’’ at proposed § 26.2(k).)
Definitions
Each of the agencies’ current
regulations sets forth definitions of key
terms used in the regulation.
The proposed regulations change
some of the current definitions. A
discussion of the substantive differences
between the current rules and proposals
follows.
Anticompetitive Effect
The current regulations neither use
nor define the term ‘‘anticompetitive
effect.’’
The proposed regulations define the
term to mean ‘‘a monopoly or
substantial lessening of competition.’’
This term is used in the Regulatory
Standards exemption. Under that
exemption, the appropriate agency may
approve a request for an exemption to
the Interlocks Act if, among other
things, the agency finds that
continuation of service by the
management official does not produce
an anticompetitive effect with respect to
the affected institution. The statute does
not define the term ‘‘anticompetitive
effect,’’ nor does the legislative history
to the CDRI Act point to a particular
definition.
The context of the Regulatory
Standards exemption suggests, however,
that the agencies should apply the term
‘‘anticompetitive effect’’ in a manner
that permits interlocks that present no
substantial lessening of competition. By
prohibiting an interlock that would
result in a monopoly or substantial
lessening of competition, the proposed
definition preserves the free flow of
credit and other banking services that
the Interlocks Act is designed to protect.
Another benefit of the proposed
definition is that it is familiar to the
banking industry, given that it is
derived from the Bank Merger Act (12
U.S.C. 1828(c)). This enables the
agencies to accomplish the legislative
purpose of the Interlocks Act without
imposing unnecessary regulatory
burdens.
Area Median Income
The current regulations do not use the
term ‘‘area median income,’’ and,
therefore, do not define this term.
The proposed regulations define ‘‘area
median income’’ as the median family
income for the metropolitan statistical
area (MSA) in which an institution is
located or the statewide
nonmetropolitan median family income
if an institution is located outside an
MSA. This term is used in the definition
of ‘‘low- and moderate-income areas,’’
which in turn is used in the
implementation of the Management
Consignment exemption.
Contiguous or Adjacent Cities, Towns,
or Villages
The current regulations define
‘‘adjacent cities, towns, or villages’’ as
cities, towns, or villages whose borders
are within 10 road miles from each
other. They also define ‘‘contiguous
cities, towns, or villages’’ as cities,
towns, or villages whose borders touch.
The statute and regulations apply these
terms to prohibit interlocks involving
small institutions that are located in
contiguous or adjacent cities, towns, or
villages.
The proposed regulations combine
these two definitions, given that
contiguous cities, towns, or villages
necessarily are within 10 miles of each
other.
Critical
The current regulations neither use
nor define ‘‘critical.’’
The proposed regulations define the
term in connection with the Regulatory
Standards exemption. Under that
exemption, the appropriate agency must
find that a proposed management
official is critical to the safe and sound
operations of the affected institution. 12
U.S.C. 3207(b)(2)(A). Neither the statute
nor its legislative history define
‘‘critical.’’
The agencies are concerned that a
narrow interpretation of this term would
nullify the Regulatory Standards
exemption. If someone were ‘‘critical’’
to the safe and sound operations of an
institution only if the institution would
fail but for the service of the person in
question, the exemption would have
little relevance because the standard
would be practically impossible to meet.
Given that Congress clearly intended for
the Regulatory Standards exemption to
permit interlocks under some
circumstances, the question thus
becomes how to define those
circumstances.
This proposal addresses the issue by
stating that the agencies will consider a
person to be critical to a depository
organization if the person will play an
important role in helping the institution
either address current problems or
maintain safe and sound operations
going forward. The agencies believe that
this approach is consistent with the
After the changes made by the CDRI
Act, a person subject to the Interlocks
Act’s restrictions seeking an exemption
from those restrictions must qualify
either for a ‘‘regulatory standards’’
exemption (the Regulatory Standards
exemption) or an exemption under a
‘‘management official consignment
program’’ (the Management
Consignment exemption). An applicant
seeking a Regulatory Standards
exemption must submit a board
resolution certifying that no other
candidate from the relevant community
has the necessary expertise to serve as
a management official, is willing to
serve, and is not otherwise prohibited
by the Interlocks Act from serving.
Before granting the exemption request,
the appropriate agency must find that
the individual is critical to the
institution’s safe and sound operations,
that the interlock will not produce an
anticompetitive effect, and that the
management official meets any
additional requirements imposed by the
agency. Under the Management
Consignment exemption, the
appropriate agency may permit an
interlock that otherwise would be
prohibited by the Interlocks Act if the
agency determines that the interlock
would improve the provision of credit
to low- and moderate-income areas,
increase the competitive position of a
minority- or woman-owned institution,
or strengthen the management of a
newly chartered institution or an
institution that is in an unsafe or
unsound condition. (See text following
‘‘Management Consignment exemption’’
in this Preamble for a discussion
regarding interlocks involving newly
chartered institutions or institutions
that are in an unsafe or unsound
condition.)
The proposal reflects these statutory
changes, and streamlines and clarifies
the interlocks regulations in various
respects. These changes are discussed in
the text that follows. The agencies invite
comments on all aspects of this
proposal.
Discussion
The following is a section-by-section
discussion of the proposed revisions.
Authority, Purpose, and Scope
This section in the agencies’ current
regulations identifies the Interlocks Act
as the statutory authority for the
management interlocks regulation. It
also states that the purpose of the rules
governing management interlocks is to
foster competition between unaffiliated
institutions. Finally, this section
currently identifies the types of
institutions to which each agency’s
regulation applies.
The proposed rule restates these
provisions and, in the OCC proposed
rule, uses the term ‘‘District bank’’ to
describe banks operating under the
Code of Laws of the District of
Columbia. (See definition of ‘‘District
bank’’ at proposed § 26.2(k).)
Definitions
Each of the agencies’ current
regulations sets forth definitions of key
terms used in the regulation.
The proposed regulations change
some of the current definitions. A
discussion of the substantive differences
between the current rules and proposals
follows.
Anticompetitive Effect
The current regulations neither use
nor define the term ‘‘anticompetitive
effect.’’
The proposed regulations define the
term to mean ‘‘a monopoly or
substantial lessening of competition.’’
This term is used in the Regulatory
Standards exemption. Under that
exemption, the appropriate agency may
approve a request for an exemption to
the Interlocks Act if, among other
things, the agency finds that
continuation of service by the
management official does not produce
an anticompetitive effect with respect to
the affected institution. The statute does
not define the term ‘‘anticompetitive
effect,’’ nor does the legislative history
to the CDRI Act point to a particular
definition.
The context of the Regulatory
Standards exemption suggests, however,
that the agencies should apply the term
‘‘anticompetitive effect’’ in a manner
that permits interlocks that present no
substantial lessening of competition. By
prohibiting an interlock that would
result in a monopoly or substantial
lessening of competition, the proposed
definition preserves the free flow of
credit and other banking services that
the Interlocks Act is designed to protect.
Another benefit of the proposed
definition is that it is familiar to the
banking industry, given that it is
derived from the Bank Merger Act (12
U.S.C. 1828(c)). This enables the
agencies to accomplish the legislative
purpose of the Interlocks Act without
imposing unnecessary regulatory
burdens.
Area Median Income
The current regulations do not use the
term ‘‘area median income,’’ and,
therefore, do not define this term.
The proposed regulations define ‘‘area
median income’’ as the median family
income for the metropolitan statistical
area (MSA) in which an institution is
located or the statewide
nonmetropolitan median family income
if an institution is located outside an
MSA. This term is used in the definition
of ‘‘low- and moderate-income areas,’’
which in turn is used in the
implementation of the Management
Consignment exemption.
Contiguous or Adjacent Cities, Towns,
or Villages
The current regulations define
‘‘adjacent cities, towns, or villages’’ as
cities, towns, or villages whose borders
are within 10 road miles from each
other. They also define ‘‘contiguous
cities, towns, or villages’’ as cities,
towns, or villages whose borders touch.
The statute and regulations apply these
terms to prohibit interlocks involving
small institutions that are located in
contiguous or adjacent cities, towns, or
villages.
The proposed regulations combine
these two definitions, given that
contiguous cities, towns, or villages
necessarily are within 10 miles of each
other.
Critical
The current regulations neither use
nor define ‘‘critical.’’
The proposed regulations define the
term in connection with the Regulatory
Standards exemption. Under that
exemption, the appropriate agency must
find that a proposed management
official is critical to the safe and sound
operations of the affected institution. 12
U.S.C. 3207(b)(2)(A). Neither the statute
nor its legislative history define
‘‘critical.’’
The agencies are concerned that a
narrow interpretation of this term would
nullify the Regulatory Standards
exemption. If someone were ‘‘critical’’
to the safe and sound operations of an
institution only if the institution would
fail but for the service of the person in
question, the exemption would have
little relevance because the standard
would be practically impossible to meet.
Given that Congress clearly intended for
the Regulatory Standards exemption to
permit interlocks under some
circumstances, the question thus
becomes how to define those
circumstances.
This proposal addresses the issue by
stating that the agencies will consider a
person to be critical to a depository
organization if the person will play an
important role in helping the institution
either address current problems or
maintain safe and sound operations
going forward. The agencies believe that
this approach is consistent with the