FIL-87-98 Attachment B

[Federal Register: August 11, 1998 (Volume 63, Number 154)]

[Proposed Rules]

[Page 43051-43058]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr11au98-49]

[[Page 43051]]

_______________________________________________________________________

Part VII

Department of the Treasury

Office of the Comptroller of the Currency

12 CFR Part 26

Federal Reserve Board

12 CFR Part 212

Federal Deposit Insurance Corporation

12 CFR Part 348

Department of the Treasury

Office of Thrift Supervision

12 CFR Part 563f

_______________________________________________________________________

Management Official Interlocks; Proposed Rule

[[Page 43052]]

DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 26

[Docket No. 98-09]

RIN 1557-AB60

FEDERAL RESERVE BOARD

12 CFR Part 212

[Docket No. R-1013]

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. 98-58]

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 notice of proposed rulemaking.

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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) 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 October 13, 1998.

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. 98-09. 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 REGS.COMMENTS@OCC.TREAS.GOV.

Board: Jennifer J. Johnson, Secretary, Board of Governors of the

Federal Reserve System, Docket No. R-1013, 20th Street and Constitution

Avenue, NW., Washington, DC 20551. Comments addressed to Ms. Johnson

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 12 CFR 261.12 of the Board's Rules

Regarding Availability of Information, 12 CFR 261.12.

FDIC: Written comments should be addressed to Robert E. Feldman,

Executive Secretary, Attention: Comments/OES, Federal Deposit Insurance

Corporation, 550 17th Street, NW, Washington, DC 20429. Comments may be

hand delivered to the guard station at the rear of the 550 17th Street

Building (located on F Street), on business days between 7:00 a.m. and

5:00 p.m. (Fax number: (202) 898-3838; Internet address:

comments@fdic.gov). Comments may be inspected and photocopied in the

FDIC Public Information Center, Room 100, 801 17th Street, NW,

Washington, DC, between 9:00 a.m. and 4:30 p.m. on business days.

OTS: Manager, Dissemination Branch, Records Management and

Information Policy, Office of Thrift Supervision, 1700 G Street, NW.,

Washington, DC 20552, Attention Docket No. 98-58. These submissions may

be hand-delivered to 1700 G Street, NW., from 9:00 to 5:00 on business

days; sent by facsimile transmission to FAX number (202) 906-7755, or

may be sent by e-mail to: public.info@ots.treas.gov. Those commenting

by e-mail should include their name and telephone number. Comments will

be available for inspection at 1700 G Street, NW., from 9:00 until 4:00

on business days.

FOR FURTHER INFORMATION CONTACT: OCC: Sue E. Auerbach, Senior Attorney,

Bank Activities and Structure, (202) 874-5300; Emily R. McNaughton,

National Bank Examiner, Senior Policy Analyst, Core Policy Development,

(202) 874-5190; Jackie Durham, Bank Organization and Structure, Senior

Licensing Policy Analyst, (202) 874-5060; or Ursula Pfeil, Attorney,

Legislative and Regulatory Activities, (202) 874-5090.

Board: Thomas M. Corsi, Senior Counsel, (202) 452-3275, or Michelle

Q. Profit, Attorney, (202) 736-5599, Legal Division, Board of Governors

of the Federal Reserve System. For the hearing impaired only,

Telecommunication Device for Deaf (TTD), Diane Jenkins, (202) 452-3544.

FDIC: Curtis Vaughn, Examination Specialist, Division of

Supervision, (202) 898-6759; John Jilovec, Examination Specialist,

Division of Supervision, (202) 898-8958; or Mark Mellon, Counsel,

Regulation and Legislation Section, Legal Division, (202) 898-3854.

OTS: David Bristol, Senior Attorney, Business Transactions

Division, Chief Counsel's Office, (202) 906-6461; or Joseph M. Casey,

Supervision Policy, (202) 906-5741.

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

interlocks between unaffiliated depository organizations, regardless of

size, if both organizations have an office 1 in the same

community (the community prohibition). Interlocks are also prohibited

between unaffiliated depository organizations if both organizations

have total assets of $20 million or more and have offices 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 the organizations

have 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, 212.2,

348.2, and 563f.2.

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Section 2210 of the Economic Growth and Regulatory Paperwork

Reduction Act of 1996 (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

[[Page 43053]]

of the organizations.2 The EGRPR Act raised the thresholds

to $2.5 billion and $1.5 billion, respectively. The revision 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

Sec. 4 of the Bank Holding Company Act to include only the assets of

their depository institution affiliates. See 12 CFR 26.2(r),

212.2(q), 348.2(q), and 563f.2(r).

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Section 2210(b) of the EGRPR Act permanently extended the

grandfather exemptions found in 12 U.S.C. 3205(a) and (b). These

exemptions were due to expire in 1998. The EGRPR Act repealed section

3205(c), which mandated Agency review of 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. Discussion of Proposed Regulations

The proposal reflects these statutory changes. This proposal also

renews an earlier proposal for a small market share exemption that the

Board, OCC, and FDIC had advanced before enactment of the CDRI Act. The

Agencies invite comments on all aspects of this proposal.

A. Definitions

The Agencies' current regulations define key terms implementing the

Interlocks Act. A number of these definitions were added or revised in

1996 to implement the CDRI Act.4 With the repeal of the

specific exemptive standards in the CDRI Act, two of these definitions

have become unnecessary and would be removed.

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\4\ See 61 FR 40293 (August 2, 1996).

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Anticompetitive Effect

The current rule defines ``anticompetitive effect'' as a ``monopoly

or substantial lessening of competition.'' Under the new statutory

scheme, the substance of this definition is the sole criterion for

gauging whether to grant an exemption under the Agencies' general

exemptive authority. Because the proposed regulations would employ this

phrase in only one provision, a separate definition is unnecessary.

Critical

The current regulations use the term ``critical'' in connection

with the Regulatory Standards exemption created by the CDRI Act. Since

the EGRPR Act eliminates the Regulatory Standards exemption, a

regulatory definition of ``critical'' is unnecessary.

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 such institution or any affiliate thereof 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 such

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 proposal would 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 provide appropriate notice of the change to depository

institutions and depository institution holding companies. The Agencies

invite comment on other types of market changes that may warrant

subsequent adjustments to the major assets prohibition.

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

CDRI 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 proposed rule would

remove these regulatory exemptions.

However, the rule proposed under the amended exemptive authority,

discussed in the following section, includes rebuttable presumptions

that interlocks in certain circumstances would not result in a monopoly

or substantial lessening of competition. These presumptions are based

on criteria that the Agencies used before the passage of the CDRI Act,

and which Congress employed in creating the Management Consignment

exemption.

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 such service would

not result in ``a monopoly or substantial lessening of competition.''

To implement this authority, the Agencies are proposing 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. The process for

obtaining such exemptions will be set out in each Agency's procedural

regulations or, in the case of the OCC, in its Corporate Manual.

Since 1979, when regulations implementing the Interlocks Act were

first promulgated, the Agencies have recognized that interlocks

involving certain classes of depository organizations present a reduced

risk to competition, and that, by enlarging the pool of management

available to such organizations, competition could be enhanced. Thus,

in the initial interlocks rules published in 1979, the Agencies

reserved the authority to permit interlocks to strengthen newly

chartered organizations, troubled organizations, organizations in low-

or moderate-income areas, and organizations controlled or managed by

minorities or women. The authority to permit interlocks in such

circumstances was deemed ``necessary for the promotion of competition

over the long term.'' 5 Prior to the CDRI Act, these

exemptions were granted to meet the need for qualified management. The

Management Consignment exemption under the CDRI Act was generally

available to the same four classes of organizations, but on a more

limited basis.

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\5\ See 44 FR 42161, 42165 (July 19, 1979).

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With the EGRPR Act's restoration of the broad exemptive authority

under the Interlocks Act, the Agencies again have

[[Page 43054]]

broad authority to grant exemptions that will not adversely affect

competition. The Agencies believe that interlocks involving the four

classes of organizations previously identified may provide management

expertise needed to enhance such organizations' ability to compete.

Accordingly, the Agencies propose 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 2 years; or

(4) the depository organization is deemed to be in ``troubled

condition'' under regulations implementing section 914 of the Financial

Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C.

1831i). 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 presumptions are designed to provide greater flexibility to

classes of organizations that may have greater need for seasoned

management. 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.

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.

Interlocks that are based on a rebuttable presumption would be

allowed to continue for three years, unless otherwise provided in the

approval order. Nothing in the proposed rule would prevent an

organization from applying for an extension of an interlock exemption

granted under a presumption if the factors continued to apply. The

organization would also be free to utilize any other exemption that may

be available. The Agencies propose that any interlock approved under

this section may continue so long as it would not result in a monopoly

or substantial lessening of competition, becomes unsafe or unsound, or

is subject to a condition requiring termination at a specific time.

E. Small Market Share Exemption

In 1994, the OCC, Board, and FDIC published notices of proposed

rulemaking seeking comment on a proposed market share

exemption.6 The proposed exemption would have been available

for interlocks involving institutions that, on a combined basis, would

control less than 20 percent of the deposits in a community or relevant

MSA. These agencies published small market share exemption proposals

pursuant to the broad exemptive authority vested in the agencies prior

to the CDRI Act. After the CDRI Act restricted the agencies' broad

authority, the OCC, Board and FDIC withdrew their

proposals.7 The broad exemptive authority under the EGRPR

Act provides authority for a small market share exemption. Accordingly,

the OCC, Board and FDIC, joined by the OTS, are issuing this proposal

for the small market share exemption.

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\6\ See OCC, 59 FR 29740 (June 9, 1994); Board, 59 FR 7909

(February 17, 1994); and FDIC, 59 FR 18764 (April 20, 1994).

\7\ See 60 FR 67424 (December 29, 1995) for withdrawal by the

OCC and the Board; and 60 FR 7139 (February 7, 1995) for withdrawal

by the FDIC.

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The exemption is intended to enlarge the pool of management talent

upon which depository institutions may draw, resulting in more

competitive, better-managed institutions without causing significant

anticompetitive effects. The Interlocks Act, by discouraging common

management among financial institutions, seeks to prevent adverse

effects on competition in the provision of products and services that

financial institutions offer. Where depository institutions dominate a

large portion of the market, these risks are significant. When a

particular market is served by many institutions, however, the risks

diminish that depository institutions with interlocking relationships

can adversely affect the available products and services in their

markets.

The Agencies believe that the combined share of the deposits of two

institutions provides a meaningful assessment of the capacity of the

two institutions to control credit and related services in their

market. Accordingly, the Agencies propose to exempt interlocking

service involving two unaffiliated depository organizations that

together control no more than 20 percent of the deposits in any RMSA or

community in which the organizations have offices. Organizations

claiming the exemption would be required to 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 (i.e.

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 would not be available for interlocks subject to

the major assets prohibition.

The exemptions would continue to apply as long as the organizations

meet the applicable conditions. Any event, such as expansion or a

merger, that causes the level of deposits controlled to exceed 20

percent of deposits in any RMSA or community would be considered to be

a change in circumstances. Accordingly, the depository organizations

would have 15 months (or such shorter period as directed by the

appropriate Agency) to address the prohibited interlock by termination

or otherwise. Conforming changes relating to termination have been made

to the Agencies' change of circumstances provisions.

No prior Agency approval would be required in order to claim the

proposed small market share exemption. Management is responsible for

compliance with the terms of the exemption and for maintaining

sufficient supporting documentation. To determine their eligibility for

the exemptions, depository organizations would need to obtain

appropriate deposit share data from the FDIC. This information is

collected in the Summary of Deposits published by the FDIC and is

available for institutions regulated by the Agencies on the Internet at

http://www.fdic.gov.

The most recently available deposit share data will be used to

determine whether organizations are entitled to the exemptions. Thus,

the depository organization seeking the exemption is entitled to rely

upon the deposit share data that has been compiled for the previous

year, until the next year's data has been distributed.

The Agencies request comments on all aspects of the proposed small

market share exemption. In particular, the Agencies request comments

regarding the following issues:

1. Whether 20 percent of the deposits in a community or RMSA is an

appropriate limit for the application of the exemptions.

2. Whether deposit data collected by the FDIC in connection with

the Report of Condition and Income should be used to determine

eligibility for the exemptions, and whether alternative

[[Page 43055]]

sources of information concerning deposit share should be acceptable

for determining availability of the exemptions.

3. Whether calculation of a depository organization's eligibility

for exemption from the community prohibition will create undue burdens,

and, if so, how the burdens could be reduced (for example, by basing

the exemption on the total asset size of the institutions involved).

4. Whether there is a significant risk that the purposes of the

Interlocks Act would be evaded through ``hub and spoke'' arrangements.

Under these arrangements, directors of one depository organization

would serve as directors of different unaffiliated organizations that

have, in the aggregate, a deposit share in excess of the 20% limit.

III. Paperwork Reduction Act

The Agencies invite comment on:

(1) Whether the proposed collection of information contained in

this notice of proposed rulemaking is necessary for the proper

performance of each Agency's functions, including whether the

information has practical utility;

(2) The accuracy of each Agency's estimate of the burden of the

proposed information collection;

(3) Ways to enhance the quality, utility, and clarity of the

information to be collected;

(4) Ways to minimize the burden of the information collection on

respondents, including the use of automated collection techniques or

other forms of information technology; and

(5) Estimates of capital or start-up costs and costs of operation,

minutes, and purchase of services to provide information.

Recordkeepers are not required to respond to this collection of

information unless it displays a currently valid OMB control number.

OCC: The collection of information requirements contained in this

notice of proposed rulemaking have been submitted to the Office of

Management and Budget for review in accordance with the Paperwork

Reduction Act of 1995 (44 U.S.C. 3507(d)). Comments on the collections

of information should be sent to the Office of Management and Budget,

Paperwork Reduction Project (1557-0196), Washington, DC 20503, with

copies to the Legislative and Regulatory Activities Division (1557-

0196), Office of the Comptroller of the Currency, 250 E Street, SW,

Washington, DC 20219.

The collection of information requirements in this proposed 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. The likely

respondents are 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 respondents: 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 proposed rule under the authority delegated to the Board

by the Office of Management and Budget. Comments on the collections of

information should be sent to the Office of Management and Budget,

Paperwork Reduction Project (7100-0046, 7100-0134, 7100-0171, 7100-

0266), Washington, DC 20503, with copies of such comments to be sent to

Mary M. McLaughlin, Chief, Financial Reports Section, Division of

Research and Statistics, Mail Stop 97, Board of Governors of the

Federal Reserve System, Washington, DC 20551.

The collection of information requirements in this proposed

rulemaking are found in 12 CFR 212.4(h)(1)(i), 212.6(b), and 212.6(c).

This information is required to evidence compliance with the

requirements of the Interlocks Act as amended by section 338 of the

CDRI Act. The respondents are state member banks and subsidiary

depository institutions of bank holding companies.

Estimated number of respondents: 6 applicants per year.

Estimated average annual burden per respondent: 4 hours.

Estimated annual frequency of reporting: Not applicable (one-time

application).

Estimated total annual reporting burden: 24 hours.

Start-up costs to respondents: None.

No issues of confidentiality under the provisions of the Freedom of

Information Act normally arise for the applications.

FDIC: The collections of information contained in this notice of

proposed rulemaking have been submitted to the Office of Management and

Budget for review in accordance with the Paperwork Reduction Act of

1995 (44 U.S.C.3507(d)). Comments on the collections of information

should be sent to the Office of Management and Budget, Paperwork

Reduction Project (3604-0118), Washington, DC 20503, with copies of

such comments to be sent to Steven F. Hanft, Office of the Executive

Secretary, Federal Deposit Insurance Corporation, 550 17th Street, NW.,

Washington, DC 20429.

The collection of information requirements in this proposed

regulation are found in 12 CFR 348.4(i)(1)(i), 348.6(b), and 348.6(c).

This information is required to evidence compliance with the

requirements of the Interlocks Act. The likely respondents are insured

nonmember banks.

Estimated number of respondents: 5 applicants per year.

Estimated average annual burden per respondent: 4 hours.

Estimated annual frequency of reporting: Not applicable (one-time

application).

Estimated total annual reporting burden: 20 hours.

OTS: The collection of information requirements contained in this

notice of proposed rulemaking have been submitted to the Office of

Management and Budget for review in accordance with the Paperwork

Reduction Act of 1995 (44 U.S.C. 3507(d)). Comments on the collection

of information should be sent to the Office of Management and Budget,

Paperwork Reduction Project (1550-0051), Washington, DC 20503, with

copies to the Office of Thrift Supervision, 1700 G Street, NW.,

Washington, DC.

The information collection requirements in this proposed rule are

found in 12 CFR 563f.4(h)(1)(i), 563f.6(b) and 563f.6(c). The OTS

requires this information as evidence of compliance with the

requirements of the Interlocks Act by savings associations. The likely

respondents are savings associations.

Estimated annual frequency of reporting: Not applicable (one-time

application).

Estimated total annual reporting burden: 32 hours.

Estimated average annual hours per respondent: 4 hours.

Estimated number of respondents: 8.

Start-up costs to respondents: None.

IV. Regulatory Flexibility Act

Pursuant to section 605(b) of the Regulatory Flexibility Act (RFA)

(5 U.S.C. 605(b)) the Agencies hereby certify that this proposed rule

will not have a significant economic impact on a substantial number of

small entities. The Agencies expect that this proposal will not: (1)

Have significant secondary or incidental effects on a substantial

number of small entities; or (2) create any additional burden on small

entities. The proposed regulations relax the criteria for obtaining an

exemption from the interlocks prohibitions, and specifically address

the needs of small

[[Page 43056]]

entities by creating the small market share exemption. Accordingly, a

regulatory flexibility analysis is not required.

V. Executive Order 12866

The OCC and OTS have determined that this proposal is not a

significant regulatory action under Executive Order 12866.

VI. Unfunded Mandates Act of 1995

The OCC and OTS have determined that the proposed 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.

List of Subjects

12 CFR Part 26

Antitrust, Holding companies, Management official interlocks,

National banks, Reporting and recordkeeping requirements.

12 CFR Part 212

Antitrust, Banks, banking, Federal Reserve System, 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 proposes to

amend 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.

* * * * *

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.

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 applications 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).

the OCC approval, an exemption permitted by paragraph (a) of this

section may continue so long as it would not result in a monopoly or

substantial lessening of competition, or be 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 that causes a

previously permissible interlock to become prohibited.

* * * * *

Dated: July 14, 1998.

Julie L. Williams,

Acting 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 proposes

to amend 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. 3201-3208; 15 U.S.C. 19.

Sec. 212.2 [Amended]

2. Section 212.2 is amended by removing paragraphs (b) and (f) and

[[Page 43057]]

redesignating paragraphs (c) through (r) as paragraphs (b) through (p),

respectively.

3. Section 212.3 is amended by revising paragraph (c) to read as

follows:

Sec. 212.3 Prohibitions.

* * * * *

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.

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 applications 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.

Board approval, an exemption permitted by paragraph (a) of this section

may continue so long as it would not result in a monopoly or

substantial lessening of competition, or be 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, July 20, 1998.

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 proposes to amend 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 is revised 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.

* * * * *

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

Wage Earners and Clerical Workers, not seasonally adjusted, with

rounding to the nearest $100 million.

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 applications for an exemption under

this section, the FDIC will apply a

[[Page 43058]]

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) of this chapter.

FDIC approval, an exemption permitted by paragraph (a) of this section

may continue so long as it would not result in a monopoly or

substantial lessening of competition, or be 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.

6. Section 348.7 is amended by revising paragraph (a) to read as

follows:

Sec. 348.7 Change in circumstances.