Management Official Interlocks

DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 26

[Docket No. 96-15]

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. 96-62]

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 final rule.

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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)

(collectively, the agencies) are revising their rules regarding

management interlocks. This final rule conforms the interlocks rules to

recent statutory changes, modernizes and clarifies the rules, and

reduces unnecessary regulatory burdens where feasible, consistent with

statutory requirements. In so doing, it reflects comments received on

the proposed rule and the agencies' further internal considerations.

EFFECTIVE DATE: This joint rule is effective October 1, 1996.

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, 250 E Street, SW., Washington, DC

20219.

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 (TDD), 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 Deale, 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

agencies 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 regulations with these purposes in mind and are amending the

regulations in ways designed to meet the goals of section 303(a).

The agencies have made the following changes to their respective

management interlocks rules in order to comply with the mandate of

section 303(a):

The final rules revise the definition of ``senior

management official'' to eliminate uncertainty as to when an employee

of a depository institution will be considered to be a senior

management official for purposes of the Depository Institution

Management Interlocks Act (12 U.S.C. 3201-3208) (Interlocks Act).

Moreover, the final rules conform this definition to definitions of

similar terms used elsewhere in the agencies' regulations.

The final rules revise the definition of ``representative

or nominee'' to clarify

[[Page 40294]]

that the agencies will determine that a person is acting as a

representative or nominee on behalf of another person only when there

is an agreement, express or implied, obligating the first person to act

on the second person's behalf with respect to management

responsibilities.

The final rules reflect a reinterpretation of the

Interlocks Act by the agencies that permits management interlocks

within a relevant metropolitan statistical area (MSA) when either of

the depository institutions in the MSA has assets of less than $20

million (the agencies previously interpreted the Interlocks Act to

permit interlocks between unaffiliated institutions in MSA only if both

depository institutions have assets of less than $20 million). This

expands the pool of available managerial talent for small depository

institutions.

In implementing the Interlocks Act's ``regulatory standards''

exemption (Regulatory Standards exemption) and the exemption under a

``management official consignment program'' (Management Consignment

exemption), the final rules contain certain presumptions and define key

terms so as to eliminate unnecessary burdens.

The final rules remove the provision concerning statutorily

grandfathered management interlocks, given that it is unnecessary in

light of the changes made to the Interlocks Act by the CDRI Act.

The agencies believe that these changes will streamline and modify

their respective management interlocks regulations, thus furthering the

goals of section 303 of the CDRI Act. These changes are explained more

fully in the discussion of the final rule and comments received.

Summary of Statutory Changes

The CDRI Act amended the 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.1

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\1\ 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.

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Pursuant to the changes made by the CDRI Act, a depository

institution seeking an exemption from the Interlocks Act's restrictions

must qualify either for a Regulatory Standards exemption or a

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: (1) improve the provision of

credit to low- and moderate-income areas; (2) increase the competitive

position of a minority- or women-owned institution; or (3) 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 a newly chartered institution or an institution

that is in an unsafe or unsound condition).

The Proposal

On December 29, 1995, the agencies published a joint notice of

proposed rulemaking (proposal) (60 FR 67424) to implement these

statutory changes. In addition, the proposal permitted interlocks

involving two institutions located in the same relevant metropolitan

statistical area (RMSA) if the institutions were not also located in

the same community and if at least one of the institutions had total

assets of less than $20 million. Finally, the proposal streamlined and

clarified the agencies' interlocks rules in various respects.

The Final Rule and Comments Received

The agencies received a total of 26 comments,2 some of which

were sent to more than one agency. Commenters overwhelmingly supported

the proposal. A few commenters, while supporting the proposal,

suggested that the agencies make additional changes as discussed later

in this preamble. Most of the provisions in the proposal received

either no comments or uniformly favorable comments. Accordingly, except

where noted in the text that follows, the agencies have adopted without

revision the changes to their respective interlocks rules that were set

forth in the proposal.

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\2\ The Board received 10 comments from the public, while the

OCC, FDIC, and OTS received 6, 6, and 4, respectively.

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The following discussion summarizes the amendments to the agencies'

management interlock rules and the comments received.

Authority, Purpose, and Scope

This section in the agencies' final rules 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 identifies the types of

institutions to which each agency's regulation applies. The OCC 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 Sec. 26.2(k).)

Definitions

Anticompetitive effect

The final rules define the term ``anticompetitive effect'' to mean

``a monopoly or substantial lessening of competition,'' a definition

derived from the Bank Merger Act (12 U.S.C. 1828(c)). The term

``anticompetitive effect'' is used in the Regulatory Standards

exemption. Under the Regulatory Standards 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

definition preserves the free flow of credit and other banking services

that the Interlocks Act is designed to protect. Moreover, use of a

definition familiar to the banking industry enables the agencies to

accomplish the legislative purpose of

[[Page 40295]]

the Interlocks Act without imposing unnecessary regulatory burdens.

Area Median Income

The final rules define ``area median income'' as the median family

income for the MSA in which an institution is located or the statewide

nonmetropolitan median family income if an institution is located

outside an MSA. The term ``area median income'' is used in the

definition of ``low- and moderate-income areas,'' which in turn is used

in the implementation of the Management Consignment exemption.

Critical

The final rules define ``critical'' as ``important to restoring or

maintaining a depository organization's safe and sound operations.''

The term ``critical'' is used in 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 defines

``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 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.

The agencies believe that the definition adopted in these final

rules is consistent with the legislative intent by insuring that only

persons of demonstrated expertise and importance to the institution's

safe and sound operations may serve pursuant to a Regulatory Standards

exemption.

Depository Institution

The final rules make no substantive change to the definition of

``depository institution.'' Two commenters noted that several of the

agencies interpret ``depository institution'' to include only those

institutions that accept deposits (see, e.g., Board Staff Opinion of

March 29, 1983, I F.R.R.S. 3-838; OCC No-Objection Letter No. 93-01,

October, 1993; FDIC Interpretive Letter No. 85-27), and requested that

the agencies clarify that these interpretations will not be affected by

the final rules. The OCC, Board, and FDIC note that the final rules

change neither the definition of ``depository institution'' nor the

application of that definition, and that the interpretations cited

remain accurate statements of the positions of these agencies.

Low- and Moderate-income Areas

The final rules define this term as a census tract (or, if an area

is not in a census tract, a block numbering area delineated by the

United States Bureau of the Census) in which the median family income

is less than 100 percent of the area median income. This term is used

in the Management Consignment exemption that permits an otherwise

impermissible interlock if the interlock would improve the provision of

credit to a low- and moderate-income area. The final rules clarify that

the agencies will evaluate whether an area is low- or moderate-income

by comparing the median family income for the census tract to be helped

(or, if there is no census tract, the block numbering area delineated

by the United States Bureau of the Census) with the area median income.

Income data will be derived from the most recent decennial census.

One commenter requested that the agencies use a cutoff of 120

percent of the area median income for determining whether an area is

``low- or moderate-income.'' This commenter suggested that this higher

cutoff would be consistent with the flexibility vested in the agencies

to implement the Management Consignment exemption in a way designed to

make it easier for institutions to serve economically disadvantaged

areas.

The agencies agree that a cutoff above 80 percent of the area

median income is appropriate, given that ``low-income'' is defined in

Title I, Subtitle A of the CDRI Act (titled ``Community Development

Banking and Financial Institutions'') to mean not more than 80 percent

of the area median income. 12 U.S.C. 4702(17). The agencies believe

that Congress, by using the term ``moderate-income'' in addition to

``low-income'' in section 338(b) of the CDRI Act (which created the

Management Consignment exemption), intended for that term to apply to

an area where the median family income exceeds the cutoff for low

income established elsewhere in the CDRI Act.

The agencies disagree, however, that a cutoff above 100 percent of

area median income is appropriate. The agencies continue to believe

that the 100 percent cutoff proposed best effectuates the Congressional

purpose of facilitating the flow of credit to economically

disadvantaged areas. Moreover, the threshold adopted is a commonly used

definition for ``moderate-income'' in other statutory provisions.3

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\3\ See, e.g., 12 U.S.C. 4502(10) (defining ``moderate-income''

in the context of the statute addressing government sponsored

enterprises).

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Management Official

The final rules define ``management official'' to include a senior

executive officer, a director, a branch manager, a trustee of an

organization under the control of trustees, or any person who has a

representative or nominee serving in such capacity. The definition

excludes (1) A person whose management functions relate either

exclusively to the business of retail merchandising or manufacturing or

principally to business outside the United States of a foreign

commercial bank and (2) a person excluded by section 202(4) of the

Interlocks Act (12 U.S.C. 3201(4)).

The final rules remove the phrase ``an employee or officer with

management functions,'' which appeared in the former rule. In its

place, the agencies have used the term ``senior executive officer'' as

defined by each agency in its regulation pertaining to the prior notice

of changes in senior executive officers, which implement section 32 of

the Federal Deposit Insurance Act (FDI Act) (12 U.S.C. 1831i) as added

by section 914 of the Financial Institutions Reform, Recovery, and

Enforcement Act of 1989 (FIRREA) (Pub. L. No. 101-73, 103 Stat. 183).

The agencies have made this change to eliminate the uncertainty and

attendant compliance burden created by the ambiguous term ``management

functions.'' The final rules incorporate specific illustrative examples

of positions at depository organizations that will be treated as senior

executive officers. See 12 CFR 5.51(c)(3) (OCC); 12 CFR 225.71(a)

(Board); 12 CFR 303.14(a)(3) (FDIC); and 12 CFR 574.9(a)(2) (OTS). The

agencies believe that these definitions will allow depository

organizations to identify impermissible interlocks with greater

certainty and thus will enhance compliance.

One commenter requested that the agencies amend the rules to expand

the exemption that exists for individuals whose management functions

relate to the business of retail merchandising or manufacturing. In

response to this request, the agencies carefully reviewed their

respective rules and concluded that the rules as drafted are

sufficiently broad to address the concerns expressed by the commenter.

This commenter also requested that the agencies clarify the procedures

by which someone may confirm that an organization complies

[[Page 40296]]

with the regulation. The agencies note that an organization may request

from the appropriate regulator at any time confirmation that a given

interlock complies with applicable law. The agencies have elected not

to impose any procedural requirements in the regulation on this type of

request.

Relevant Metropolitan Statistical Area (RMSA)

The final rules, like the former rules, define ``relevant

metropolitan statistical area (RMSA)'' as an MSA, a primary MSA, or a

consolidated MSA that is not comprised of designated primary MSAs.

However, unlike the former rules, the final rules clarify that this

definition will be used to the extent that the Office of Management and

Budget (OMB) defines and applies the terms MSA, primary MSA, and

consolidated MSA. This change reflects the fact that OMB defines

``consolidated MSA'' to include two or more primary MSAs. Given that a

consolidated MSA, by OMB's definition, is comprised of primary MSAs,

the reference to a consolidated MSA in the Interlocks Act and the

agencies' regulations is inappropriate. The final rules enable the

agencies to implement the statute in a way that complies with both the

spirit and the letter of the Interlocks Act.

Representative or Nominee

The final rules define ``representative or nominee'' as someone who

serves as a management official and has an obligation to act on behalf

of someone else. The final rules remove the rest of the definition that

appeared in the former rule, however, and insert in lieu thereof a

statement that the appropriate agency will find that someone has an

obligation to act on behalf of someone else only if there is an

agreement (express or implied) to act on behalf of another. This change

clarifies that the determination of whether someone serves a

representative or nominee will depend on whether there is a basis to

conclude that an agreement exists to act on someone's behalf.

Prohibitions

The former rules prohibited interlocks in the following three

instances. First, no two unaffiliated depository organizations may have

an interlock if they (or their depository institution affiliates) have

depository institution offices in the same community. Second, a

depository organization may not have an interlock with any unaffiliated

depository organization if either depository organization has assets of

$20 million or more and the depository organizations (or depository

institution affiliates of either) have depository institution offices

in the same RMSA.4 Third, if a depository organization has total

assets exceeding $1 billion, it (and its affiliates) may not have an

interlock with any depository organization with total assets exceeding

$500 million (or affiliate thereof), regardless of location.

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\4\ A community as that term is defined in the rules is smaller

than an RMSA. There may be several communities in one RMSA.

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The final rules amend the restriction applicable to institutions

with assets equal to or exceeding $20 million to better conform to the

purposes of the Interlocks Act. Whereas the former rules prohibited

interlocks in an RMSA if one of the organizations has total assets of

$20 million or more, the final rules apply the RMSA-wide prohibition

only if both organizations have total assets of $20 million or more.

Interlocks within a community involving unaffiliated depository

organizations will continue to be prohibited, regardless of the size of

the organizations.

The agencies believe that this change is consistent with both the

language and the intent of the Interlocks Act. While the statute uses

the plural ``depository institutions'' in section 203(1) of the

Interlocks Act (12 U.S.C. 3202(1)), in context, the wording is

ambiguous and neither the statute nor its legislative history compels

the conclusion that the interlock must involve two institutions with

less than $20 million in assets before the less restrictive prohibition

applies.

The Interlocks Act seeks to prohibit interlocks that could enable

two institutions to engage in anticompetitive behavior. However, an

institution with total assets of less than $20 million is likely to

derive most of its business from the community in which it is located

and is unlikely to compete with institutions that do not have offices

in that community. Therefore, an interlock involving one institution

with assets under $20 million and another institution with assets of at

least $20 million not in the same community is not likely to lead to

the anticompetitive conduct that the Interlocks Act is designed to

prohibit.

The agencies believe, moreover, that the change will promote rather

than inhibit competition. Expanding the pool of managerial talent for

institutions with assets under $20 million could enhance the ability of

smaller institutions to compete by improving the management of these

institutions.

Every comment on this change either supported the change without

qualification or supported the change and asked the agencies go even

farther. A few commenters suggested that the agencies should raise the

asset thresholds discussed earlier and/or provide blanket exceptions

for institutions with total assets below certain levels. The agencies

note that the Interlocks Act, which establishes the thresholds at which

the various prohibitions apply, does not vest the agencies with

authority to change these levels or to exempt classes of organizations

from the statute's prohibitions. Accordingly, the agencies have not

adopted the changes proposed by these commenters.

Interlocking Relationships Expressly Permitted by Statute

The final rules state the exemptions found in 12 U.S.C. 3204 (1)-

(8).5 The final rules reorder the exemptions set forth in the

current regulations in order to conform the list of exemptions to the

list set forth in the Interlocks Act.

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\5\ The Interlocks Act contains an additional exemption for

savings associations and savings and loan holding companies that

have issued stock in connection with a qualified stock issuance

pursuant to section 10(q) of the Home Owners' Loan Act (12 U.S.C.

1467a(q)). See 12 U.S.C. 3204(9). The OTS therefore will continue to

list an additional exemption in its interlocks regulation that the

other agencies do not list. Another exemption provides for

interlocks as a result of an emergency acquisition of a savings

association authorized in accordance with section 13(k) of the

Federal Deposit Insurance Act (12 U.S.C. 1823(k)) if the FDIC has

given its approval to the interlock. The FDIC will continue to list

an additional exemption in its management interlocks regulation that

the other agencies do not list.

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Regulatory Standards Exemption

The final rules set forth the requirements that a depository

organization must satisfy in order to obtain a Regulatory Standards

exemption. The rules implement the requirement regarding certification

by allowing a depository organization's board of directors (or the

organizers of a depository organization that is being formed) to

certify to the appropriate agency that no other qualified candidate has

been found after undertaking reasonable efforts to locate qualified

candidates who are not prohibited from service under the Interlocks

Act. If read narrowly, the Interlocks Act could require a depository

organization to evaluate every person in a given locale that might be

qualified and interested. This would create a requirement that, in

practice, would be impossible to satisfy. Given that Congress would not

have included an exemption that would have no practical application,

the agencies believe that the ``reasonable efforts'' standard is

consistent with the legislative intent.

[[Page 40297]]

The final rules also set forth presumptions that the agencies will

apply when reviewing an application for a Regulatory Standards

exemption. First, each agency will presume that an interlock will not

have an anticompetitive effect if it involves institutions that, if

merged, would not trigger a challenge from the agencies on competitive

grounds. This presumption is unavailable, however, for interlocks

subject to the Major Assets prohibition.

Generally, the agencies will not object to a merger on competitive

grounds if the post-merger Herfindahl-Hirschman Index (HHI) for the

market is less than 1800 and the merger increases the HHI by 200 points

or less. This presumption will enable applicants to avoid the

unnecessary burden of submitting a competitive analysis in several

instances. The agencies have found this HHI benchmark to be a useful

guide to evaluating anticompetitive effects of interlocks.6

However, the agencies may decide that this presumption should not be

conclusive in appropriate circumstances, such as when approval of an

interlock request would lead to several institutions being linked by

overlapping management.

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\6\ See, e.g., the OCC's Bank Merger Competitive Analysis Screen

(OCC Advisory Letter 95-4, July 18, 1995); Department of Justice

Merger Guidelines (49 FR 26823, June 29, 1984) (applied by the

Board); FDIC Statement of Policy: Bank Merger Transactions (54 FR

39045, Sept. 22, 1989).

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Second, the agencies will presume that a person is critical to an

institution's safe and sound operations if the agencies also approved

that individual under section 914 of FIRREA and the institution in

question either was a newly chartered institution, failed to meet

minimum capital requirements, or otherwise was in a ``troubled

condition'' as defined in the reviewing agency's section 914 regulation

at the time the section 914 filing was approved.7

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\7\ This presumption also applies to individuals whose service

as a senior executive officer is approved by the OCC pursuant to the

standard conditions imposed on newly chartered national banks and to

individuals whose service as a management official is approved by

the FDIC as a condition of a grant of deposit insurance prior to the

opening of the depository institution.

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The final rules also address the duration of an interlock permitted

under the Regulatory Standards exemption. The statute does not require

that these interlocks terminate. In light of this open-ended grant of

authority, the agencies have not adopted a specific term for a

permitted exemption. Instead, an agency may require an institution to

terminate the interlock if the agency determines that the management

official in question either no longer is critical to the safe and sound

operations of the affected organization or that continued service will

produce an anticompetitive effect. The agencies will provide affected

organizations an opportunity to submit information before they make a

final determination to require termination of an interlock.

One commenter suggested that the agencies clarify that the 15-month

grace period that applies when an interlock must be terminated due to a

change in circumstances also applies in the case of a Regulatory

Standards exemption that must be terminated. The agencies agree with

the commenter that it is appropriate in most cases to grant a grace

period following the termination of a Regulatory Standards exemption in

order to minimize the disruption of the affected institution that

otherwise might be caused by the loss of a management official.

There may be circumstances, however, where immediate termination of

a regulatory standards exemption would be appropriate. For instance, if

an organization obtains an exemption on the basis of misleading

information, the organization's primary regulator will require the

organization to take appropriate steps to immediately remedy the

situation. The final rules thus provide for the possibility of a grace

period, with the caveat that the agencies may, under appropriate

circumstances, order the immediate termination of a Regulatory

Standards exemption.

Another commenter suggested that the agencies limit the term of a

Regulatory Standards exemption when the exemption is granted. This

commenter opined that depository organizations would benefit from the

greater certainty by avoiding questions concerning whether a director

must vacate his or her position on a board. The agencies believe that

the procedures in the final rules for terminating a Regulatory

Standards exemption will provide an affected organization with ample

certainty concerning the permissibility of continued service.

Grandfathered Interlocking Relationships--Removed

Section 338(a) of the CDRI Act authorizes the agencies to extend a

grandfathered interlock for an additional five years if the management

official in question satisfies the statutory criteria for obtaining an

extension.

The final rules remove the sections addressing the grandfather

exemption because they are unnecessary and redundant in light of the

statute. Individuals who wished to extend their exemption already have

applied for and received an exemption if they met the statutory

criteria.

Management Consignment Exemption

The final rules implement the Management Consignment exemption, set

forth in section 209(c) of the Interlocks Act (12 U.S.C. 3207(c)), by

restating the statutory criteria with three clarifications. First, the

final rules state that the agencies consider a ``newly chartered

institution'' to be an institution that has been chartered for less

than two years at the time it files an application for exemption. This

standard is consistent with certain other banking agency thresholds for

determining when an institution is considered newly chartered (see,

e.g., 12 CFR 5.51(d), 225.72(a)(1); 303.14(b)).

Second, the final rules clarify that the exemption available for

``minority- and women-owned institutions'' is available for an

institution that is owned either by minorities or women. In analyzing

the exemptions to the Interlocks Act that the Federal banking agencies

have approved, the House Conference Report to the CDRI Act (H.R. Conf.

Rep. No. 652, 103d Cong., 2d Sess. 181 (1994)) (Conference Report)

states that the types of institutions that have received exemptions

include those that are ``owned by women or minorities.'' These

exemptions ultimately were codified in the Interlocks Act. Accordingly,

the agencies have concluded that Congress intended the Management

Consignment exemption to assist institutions owned by women and/or by

minorities, but did not intend to require the institution to be owned

by both.

Third, the final rules permit an interlock if the interlock would

strengthen the management of either a newly chartered institution or an

institution that is in an unsafe or unsound condition. Section

209(c)(1)(C) of the Interlocks Act (12 U.S.C. 3207(c)(1)(C)) permits an

exemption if the interlock would ``strengthen the management of newly

chartered institutions that are in an unsafe or unsound condition.''

However, this provision contains what appears on its face to be an

error, given that an exemption limited to situations involving newly

chartered institutions that also are in an unsafe and unsound condition

would have no practical utility. The chartering agencies do not approve

an application for a bank or thrift charter unless the applicant

seeking a charter can demonstrate that the proposed new financial

institution will operate in a safe and sound manner for the foreseeable

future. While there may be an extraordinary instance where

[[Page 40298]]

a newly chartered institution immediately experiences unforeseen

problems so severe that they threaten the safety and soundness of that

institution, there is nothing in the legislative history to suggest

that Congress intended to limit the Management Consignment exemption to

such rare instances.

Moreover, the legislative history of the CDRI Act suggests that the

agencies are to apply the Management Consignment exemption in cases

involving either newly chartered institutions or institutions that are

in an unsafe or unsound condition. The Conference Report notes that the

agencies have used their exemptive authority to grant exemptions in

limited cases where institutions ``are particularly in need of

management guidance and expertise to operate in a safe and sound

manner.'' Id. The Conference Report goes on to state that ``Examples of

exceptions permissible under an agency management official consignment

program include improving the provision of credit to low- and moderate-

income areas, increasing the competitive position of minority- and

women-owned institutions, and strengthening the [sic] management of

newly chartered institutions or institutions that are in an unsafe or

unsound condition.'' Id. at 182 (emphasis added).

Finally, Congress used the exemptions in the agencies' current

rules as the model for the Management Consignment exemption. See id. at

181-182. These exemptions distinguish newly chartered institutions from

institutions that are in an unsafe or unsound condition. The reference

in the CDRI Act's legislative history to the current regulatory

exemptions suggests that Congress intended to codify these exemptions.

For these reasons, the agencies will permit Management Consignment

exemptions if the management official will strengthen either a newly

chartered institution or an institution that is in an unsafe or unsound

condition.

The final rules set forth two presumptions that the agencies will

apply in connection with an application for an exemption under the

Management Consignment exemption. First, the agencies will presume that

an individual is capable of strengthening the management of an

institution that has been chartered for less than two years if the

reviewing agency approved the individual to serve as a management

official of that institution pursuant to section 914 of FIRREA.8

Second, the agencies will presume that an individual is capable of

strengthening the management of an institution that is in an unsafe or

unsound condition if the reviewing agency approved the individual to

serve under section 914 as a management official of that institution at

a time when the institution was not in compliance with minimum capital

requirements or otherwise was in a ``troubled condition.''

---------------------------------------------------------------------------

\8\ This presumption also applies to an individual whose

service as a senior executive officer of a national bank is approved

pursuant to the standard conditions imposed by the OCC on newly

chartered national banks and to an individual whose service as a

management official is approved by the FDIC as a condition of a

grant of deposit insurance prior to the opening of the depository

institution.

---------------------------------------------------------------------------

The agencies believe that presumptions of suitability are less

valid when applied to the other Management Consignment exemptions

because there is no reason to conclude that a management official

approved under section 914 necessarily will improve the flow of credit

to low- and moderate-income areas or increase the competitive position

of minority- or women-owned institutions. Moreover, the final rules do

not contain a presumption regarding effects on competition, given that

this is not a factor to be considered by the agencies when reviewing an

application for a Management Consignment exemption.

The final rules set forth the limits on the duration of a

Management Consignment exemption. The Interlocks Act limits a

Management Consignment exemption to two years, with a possible

extension for up to an additional two years if the applicant satisfies

at least one of the criteria for obtaining a Management Consignment

exemption. The final rules implement this limitation by requiring

interested parties to submit an application for an extension at least

30 days before the expiration of the initial term of the exemption and

by clarifying that the presumptions that apply to initial applications

also apply to extension applications.

One commenter suggested that the agencies should be consistent in

how they address the duration of a Management Consignment exemption

with how the agencies address the duration of a Regulatory Standards

exemption, and permit a Management Consignment exemption to last until

the appropriate agency orders the interlock terminated. The statute is

clear, however, that a Management Consignment exemption may not last

more than one initial two-year term and one extension of up to an

additional two years in appropriate circumstances. Accordingly, the

agencies have not adopted the approach suggested by the commenter.

Change in Circumstances

The final rules provide a 15-month grace period for

nongrandfathered interlocks that become impermissible due to a change

in circumstances. This period may be shortened by the agencies under

appropriate circumstances.

Paperwork Reduction Act

OCC: The collection of information requirements contained in this

final rule have been reviewed and approved by the Office of Management

and Budget in accordance with the Paperwork Reduction Act of 1995 (44

U.S.C. 3507(d)) under control number 1557-0196. 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 final rule are

found in 12 CFR 26.4(h)(1)(i), 26.5(a)(1), 26.5(a)(2), 26.6(a), and

26.6(c). This information is required by the Interlocks Act, and will

be used by the OCC to evaluate compliance with the requirements of the

Interlocks Act by national banks and District banks. The collections of

information are required to obtain a benefit.

Respondents are not required to respond to the foregoing collection

of information unless it displays a currently valid OMB control number.

The likely respondents are national banks and District banks.

Estimated average annual burden hours per respondent: 3 hours.

Estimated number of respondents: 100.

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 final 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, Federal Reserve Board Clearance Officer, Division

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

[[Page 40299]]

Federal Reserve System, Washington, DC 20551.

The collection of information requirements in this final rule are

found in 12 CFR 212.4(h)(1)(i), 212.5(a)(1), 212.5(a)(2), 212.6(a), 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.

Currently, information on management official interlocks is

gathered as a part of the following applications: membership in the

Federal Reserve System (OMB No. 7100-0046); state member bank mergers

(OMB No. 7100-0266); changes in bank control (OMB No. 7100-0134); and

bank holding company acquisitions of depository institutions (OMB No.

7100-0171). The estimated portion of burden for each application that

is attributable to management interlocks averages 4 hours, and the

burden ranges from as much as 6 hours to as little as 0.5 hours. It is

estimated that 822 applications are filed annually, with an estimate of

3,288 hours of annual burden. Based on an hourly cost of $20, the

annual cost to the public is estimated to be $65,760. The Federal

Reserve believes that the final rule will have a minimal effect on

respondent burden.

The Federal Reserve may not conduct or sponsor, and an organization

is not required to respond to, these information collections unless

they display currently valid OMB control numbers.

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 final rule

have been reviewed and approved by the Office of Management and Budget

under control number 3064-0118 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, Room F-453, Federal Deposit Insurance Corporation,

550 17th Street, NW., Washington, DC 20429.

The collection of information requirements in this final rule are

found in 12 CFR 348.4(i)(1)(i), 348.5(a)(1), 348.5(a)(2), 348.6(a), and

348.6(c). This information is required by the Interlocks Act as amended

by section 338 of the CDRI Act, and will be used by the FDIC to

evaluate compliance with the requirements of the Interlocks Act by

insured nonmember banks. The likely respondents are insured nonmember

banks.

Estimated number of respondents: 6 applicants per year.

Estimated average annual burden per respondent: 4 hours.

Estimated annual frequency of recordkeeping: Not applicable (one-

time application).

Estimated total annual recordkeeping burden: 24 hours.

OTS: The collection of information requirements contained in this

rule have been reviewed and approved by 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

Business Transactions Division (1550-0051), Office of Thrift

Supervision, 1700 G Street, NW., Washington, DC.

The collection of information requirements in this final rule are

found in 12 CFR 563f.4(h)(1)(i), 563f.5(a)(1), 563f.5(a)(2), 563f.6(a),

and 563f.6(c). This information is required by the Interlocks Act, and

will be used by the OTS to evaluate compliance with the requirements of

the Interlocks Act by savings associations. The collections of

information are required to obtain a benefit.

Respondents are not required to respond to the foregoing collection

of information unless it displays a currently valid OMB control number.

The likely respondents are savings associations.

Estimated average annual burden hours per respondent: 4 hours.

Estimated number of respondents: 8.

Start-up costs to respondents: None.

Regulatory Flexibility Act

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

(5 U.S.C. 605(b)), the regulatory flexibility analysis otherwise

required under section 603 of the RFA (5 U.S.C. 603) is not required if

the head of the agency certifies that the rule will not have a

significant economic impact on a substantial number of small entities

and the agency publishes such certification and a succinct statement

explaining the reasons for such certification in the Federal Register

along with its final rule.

Pursuant to section 605(b) of the RFA, the agencies hereby certify

that this rule will not have a significant economic impact on a

substantial number of small entities. The agencies expect that this

rule 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 changes to the exemptions are required by

the Interlocks Act. The agencies have added presumptions that will

streamline and simplify the application procedures for obtaining an

exemption from the Interlocks Act prohibitions, and have defined key

terms used in the provisions implementing these exemptions in a way

that is intended to eliminate any unnecessary burden. As noted in the

preamble discussion of the changes made by the final rule, the agencies

have made substantive changes that will permit more flexibility to

institutions with total assets of less than $20 million, clarified the

circumstances under which someone will be deemed to be a

``representative or nominee,'' and amended the definition of ``senior

management official'' so as to provide greater clarity and to conform

this definition with definitions of similar terms used in other

regulations.

The impact of these changes will be to minimize, to the extent

possible, the costs of complying with this final rule.

Executive Order 12866

OCC and OTS: The OCC and OTS have determined that this rule is not

a significant regulatory action under Executive Order 12866.

Unfunded Mandates Act of 1995

OCC and OTS: Section 202 of the Unfunded Mandates Act of 1995

(Unfunded Mandates Act) requires that an agency prepare a budgetary

impact statement before promulgating a rule likely to result in a

Federal mandate that may result in the annual expenditure of $100

million or more in any one year by State, local, and tribal

governments, in the aggregate, or by the private sector. If a budgetary

impact statement is required, section 205 of the Unfunded Mandates Act

requires an agency to identify and consider a reasonable number of

alternatives before promulgating the rule.

The OCC and OTS have determined that this final 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.

[[Page 40300]]

List of Subjects

12 CFR Part 26

Antitrust, Banks, banking, Holding companies, Management official

interlocks, National banks.

12 CFR Part 212

Antitrust, Banks, banking, Holding companies, Management official

interlocks.

12 CFR Part 348

Antitrust, Banks, banking, Holding companies.

12 CFR Part 563f

Antitrust, Holding companies, Management official interlocks,

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 revises part

26 of chapter I of title 12 of the Code of Federal Regulations to read

as follows:

PART 26--MANAGEMENT OFFICIAL INTERLOCKS

Sec.

26.1 Authority, purpose, and scope.

26.2 Definitions.

26.3 Prohibitions.

26.4 Interlocking relationships permitted by statute.

26.5 Regulatory Standards exemption.

26.6 Management Consignment exemption.

26.7 Change in circumstances.

26.8 Enforcement.

Authority: 12 U.S.C. 93a and 3201-3208.

Sec. 26.1 Authority, purpose, and scope.

(a) Authority. This part is issued under the provisions of the

Depository Institution Management Interlocks Act (Interlocks Act) (12

U.S.C. 3201 et seq.), as amended, and the OCC's general rulemaking

authority in 12 U.S.C. 93a.

(b) Purpose. The purpose of the Interlocks Act and this part is to

foster competition by generally prohibiting a management official from

serving two nonaffiliated depository organizations in situations where

the management interlock likely would have an anticompetitive effect.

(c) Scope. This part applies to management officials of national

banks, District banks, and affiliates of either.

Sec. 26.2 Definitions.

For purposes of this part, the following definitions apply:

(a) Affiliate. (1) The term affiliate has the meaning given in

section 202 of the Interlocks Act (12 U.S.C. 3201). For purposes of

that section 202, shares held by an individual include shares held by

members of his or her immediate family. ``Immediate family'' means

spouse, mother, father, child, grandchild, sister, brother, or any of

their spouses, whether or not any of their shares are held in trust.

(2) For purposes of section 202(3)(B) of the Interlocks Act (12

U.S.C. 3201(3)(B)), an affiliate relationship involving a national bank

based on common ownership does not exist if the OCC determines, after

giving the affected persons the opportunity to respond, that the

asserted affiliation was established in order to avoid the prohibitions

of the Interlocks Act and does not represent a true commonality of

interest between the depository organizations. In making this

determination, the OCC considers, among other things, whether a person,

including members of his or her immediate family, whose shares are

necessary to constitute the group owns a nominal percentage of the

shares of one of the organizations and the percentage is substantially

disproportionate to that person's ownership of shares in the other

organization.

(b) Anticompetitive effect means a monopoly or substantial

lessening of competition.

(c) Area median income means:

(1) The median family income for the metropolitan statistical area

(MSA), if a depository organization is located in an MSA; or

(2) The statewide nonmetropolitan median family income, if a

depository organization is located outside an MSA.

(d) Community means a city, town, or village, and contiguous or

adjacent cities, towns, or villages.

(e) Contiguous or adjacent cities, towns, or villages means cities,

towns, or villages whose borders touch each other or whose borders are

within 10 road miles of each other at their closest points. The

property line of an office located in an unincorporated city, town, or

village is the boundary line of that city, town, or village for the

purpose of this definition.

(f) Critical means important to restoring or maintaining a

depository organization's safe and sound operations.

(g) Depository holding company means a bank holding company or a

savings and loan holding company (as more fully defined in section 202

of the Interlocks Act (12 U.S.C. 3201)) having its principal office

located in the United States.

(h) Depository institution means a commercial bank (including a

private bank), a savings bank, a trust company, a savings and loan

association, a building and loan association, a homestead association,

a cooperative bank, an industrial bank, or a credit union, chartered

under the laws of the United States and having a principal office

located in the United States. Additionally, a United States office,

including a branch or agency, of a foreign commercial bank is a

depository institution.

(i) Depository institution affiliate means a depository institution

that is an affiliate of a depository organization.

(j) Depository organization means a depository institution or a

depository holding company.

(k) District bank means any State bank operating under the Code of

Law of the District of Columbia.

(l) Low- and moderate-income areas means census tracts (or, if an

area is not in a census tract, block numbering areas delineated by the

United States Bureau of the Census) where the median family income is

less than 100 percent of the area median income.

(m) Management official. (1) The term management official means:

(i) A director;

(ii) An advisory or honorary director of a depository institution

with total assets of $100 million or more;

(iii) A senior executive officer as that term is defined in 12 CFR

5.51(c)(3);

(iv) A branch manager;

(v) A trustee of a depository organization under the control of

trustees; and

(vi) Any person who has a representative or nominee serving in any

of the capacities in this paragaph (m)(1).

(2) The term management official does not include:

(i) A person whose management functions relate exclusively to the

business of retail merchandising or manufacturing;

(ii) A person whose management functions relate principally to the

business outside the United States of a foreign commercial bank; or

(iii) A person described in the provisos of section 202(4) of the

Interlocks Act (12 U.S.C. 3201(4)) (referring to an officer of a State-

chartered savings bank, cooperative bank, or trust company that neither

makes real estate mortgage loans nor accepts savings).

(n) Office means a principal or branch office of a depository

institution located in the United States. Office does not include a

representative office of a foreign commercial bank, an electronic

terminal, or a loan production office.

(o) Person means a natural person, corporation, or other business

entity.

[[Page 40301]]

(p) Relevant metropolitan statistical area (RMSA) means an MSA, a

primary MSA, or a consolidated MSA that is not comprised of designated

primary MSAs to the extent that these terms are defined and applied by

the Office of Management and Budget.

(q) Representative or nominee means a natural person who serves as

a management official and has an obligation to act on behalf of another

person with respect to management responsibilities. The OCC will find

that a person has an obligation to act on behalf of another person only

if the first person has an agreement, express or implied, to act on

behalf of the second person with respect to management

responsibilities. The OCC will determine, after giving the affected

persons an opportunity to respond, whether a person is a representative

or nominee.

(r) Total assets. (1) The term total assets means assets measured

on a consolidated basis and reported in the most recent fiscal year-end

Consolidated Report of Condition and Income.

(2) The term total assets does not include:

(i) Assets of a diversified savings and loan holding company as

defined by section 10(a)(1)(F) of the Home Owners' Loan Act (12 U.S.C.

1467a(a)(1)(F)) other than the assets of its depository institution

affiliate;

(ii) Assets of a bank holding company that is exempt from the

prohibitions of section 4 of the Bank Holding Company Act of 1956

pursuant to an order issued under section 4(d) of that Act (12 U.S.C.

1843(d)) other than the assets of its depository institution affiliate;

or

(iii) Assets of offices of a foreign commercial bank other than the

assets of its United States branch or agency.

(s) United States means the United States of America, any State or

territory of the United States of America, the District of Columbia,

Puerto Rico, Guam, American Samoa, and the Virgin Islands.

Sec. 26.3 Prohibitions.

(a) Community. A management official of a depository organization

may not serve at the same time as a management official of an

unaffiliated depository organization if the depository organizations in

question (or a depository institution affiliate thereof) have offices

in the same community.

(b) RMSA. A management official of a depository organization may

not serve at the same time as a management official of an unaffiliated

depository organization if the depository organizations in question (or

a depository institution affiliate thereof) have offices in the same

RMSA and each depository organization has total assets of $20 million

or more.

(c) Major assets. A management official of a depository

organization with total assets exceeding $1 billion (or any affiliate

thereof) may not serve at the same time as a management official of an

unaffiliated depository organization with total assets exceeding $500

million (or any affiliate thereof), regardless of the location of the

two depository organizations.

Sec. 26.4 Interlocking relationships permitted by statute.

The prohibitions of Sec. 26.3 do not apply in the case of any one

or more of the following organizations or to a subsidiary thereof:

(a) A depository organization that has been placed formally in

liquidation, or which is in the hands of a receiver, conservator, or

other official exercising a similar function;

(b) A corporation operating under section 25 or section 25A of the

Federal Reserve Act (12 U.S.C. 601 et seq. and 12 U.S.C. 611 et seq.,

respectively) (Edge Corporations and Agreement Corporations);

(c) A credit union being served by a management official of another

credit union;

(d) A depository organization that does not do business within the

United States except as an incident to its activities outside the

United States;

(e) A State-chartered savings and loan guaranty corporation;

(f) A Federal Home Loan Bank or any other bank organized solely to

serve depository institutions (a bankers' bank) or solely for the

purpose of providing securities clearing services and services related

thereto for depository institutions and securities companies;

(g) A depository organization that is closed or is in danger of

closing as determined by the appropriate Federal depository

institutions regulatory agency and is acquired by another depository

organization. This exemption lasts for five years, beginning on the

date the depository organization is acquired; and

(h)(1) A diversified savings and loan holding company (as defined

in section 10(a)(1)(F) of the Home Owners' Loan Act (12 U.S.C.

1467a(a)(1)(F)) with respect to the service of a director of such

company who also is a director of an unaffiliated depository

organization if:

(i) Both the diversified savings and loan holding company and the

unaffiliated depository organization notify their appropriate Federal

depository institutions regulatory agency at least 60 days before the

dual service is proposed to begin; and

(ii) The appropriate regulatory agency does not disapprove the dual

service before the end of the 60-day period.

(2) The OCC may disapprove a notice of proposed service if it finds

that:

(i) The service cannot be structured or limited so as to preclude

an anticompetitive effect in financial services in any part of the

United States;

(ii) The service would lead to substantial conflicts of interest or

unsafe or unsound practices; or

(iii) The notificant failed to furnish all the information required

by the OCC.

(3) The OCC may require that any interlock permitted under this

paragraph (h) be terminated if a change in circumstances occurs with

respect to one of the interlocked depository organizations that would

have provided a basis for disapproval of the interlock during the

notice period.

Sec. 26.5 Regulatory Standards exemption.

(a) Criteria. The OCC may permit an interlock that otherwise would

be prohibited by the Interlocks Act and Sec. 26.3 if:

(1) The board of directors of the depository organization (or the

organizers of a depository organization being formed) that seeks the

exemption provides a resolution to the OCC certifying that the

organization, after the exercise of reasonable efforts, is unable to

locate any other candidate from the community or RMSA, as appropriate,

who:

(i) Possesses the level of expertise required by the depository

organization and who is not prohibited from service by the Interlocks

Act; and

(ii) Is willing to serve as a management official; and

(2) The OCC, after reviewing an application submitted by the

depository organization seeking the exemption, determines that:

(i) The management official is critical to the safe and sound

operations of the affected depository organization; and

(ii) Service by the management official will not produce an

anticompetitive effect with respect to the depository organization.

(b) Presumptions. The OCC applies the following presumptions when

reviewing any application for a Regulatory Standards exemption:

(1) An interlock will not have an anticompetitive effect if it

involves depository organizations that, if merged, would not cause the

post-merger Herfindahl-Hirschman Index (HHI) to exceed 1800 and would

not cause the HHI to increase by more than 200 points. This presumption

does not

[[Page 40302]]

apply to depository organizations subject to the Major Assets

prohibition of Sec. 26.3(c).

(2) A proposed management official is critical to the safe and

sound operations of a depository institution if:

(i) That official is approved by the OCC to serve as a director or

senior executive officer of that institution pursuant to 12 CFR 5.51 or

pursuant to conditions imposed on a newly chartered national bank; and

(ii) The institution had operated for less than two years, was not

in compliance with minimum capital requirements, or otherwise was in a

``troubled condition'' as defined in 12 CFR 5.51 at the time the

service under that section was approved.

(c) Duration of interlock. An interlock permitted under this

section may continue until the OCC notifies the affected depository

organizations otherwise. The OCC may require a national bank to

terminate any interlock permitted under this section if the OCC

concludes, after giving the affected persons the opportunity to

respond, that the determinations under paragraph (a)(2) of this section

no longer may be made. A management official may continue serving the

depository organization involved in the interlock for a period of 15

months following the date of the order to terminate the interlock. The

OCC may shorten this period under appropriate circumstances.

Sec. 26.6 Management Consignment exemption.

(a) Criteria. The OCC may permit an interlock that otherwise would

be prohibited by the Interlocks Act and Sec. 26.3 if the OCC, after

reviewing an application submitted by the depository organization

seeking an exemption, determines that the interlock would:

(1) Improve the provision of credit to low- and moderate-income

areas;

(2) Increase the competitive position of a minority- or women-owned

depository organization;

(3) Strengthen the management of a depository institution that has

been chartered for less than two years at the time an application is

filed under this part; or

(4) Strengthen the management of a depository institution that is

in an unsafe or unsound condition as determined by the OCC on a case-

by-case basis.

(b) Presumptions. The OCC applies the following presumptions when

reviewing any application for a Management Consignment exemption:

(1) A proposed management official is capable of strengthening the

management of a depository institution described in paragraph (a)(3) of

this section if that official is approved by the OCC to serve as a

director or senior executive officer of that institution pursuant to 12

CFR 5.51 or pursuant to conditions imposed on a newly chartered

national bank and the institution had operated for less than two years

at the time the service under 12 CFR 5.51 was approved; and

(2) A proposed management official is capable of strengthening the

management of a depository institution described in paragraph (a)(4) of

this section if that official is approved by the OCC to serve as a

director or senior executive officer of that institution pursuant to 12

CFR 5.51 and the institution was not in compliance with minimum capital

requirements or otherwise was in a ``troubled condition'' as defined

under 12 CFR 5.51 at the time service under that section was approved.

(c) Duration of interlock. An interlock granted under this section

may continue for a period of two years from the date of approval. The

OCC may extend this period for one additional two-year period if the

depository organization applies for an extension at least 30 days

before the current exemption expires and satisfies one of the criteria

specified in paragraph (a) of this section. The provisions set forth in

paragraph (b) of this section also apply to applications for

extensions.

Sec. 26.7 Change in circumstances.

(a) Termination. A management official shall terminate his or her

service or apply for an exemption to the Interlocks Act if a change in

circumstances causes the service to become prohibited under that Act. A

change in circumstances may include, but is not limited to, an increase

in asset size of an organization, a change in the delineation of the

RMSA or community, the establishment of an office, an acquisition, a

merger, a consolidation, or any reorganization of the ownership

structure of a depository organization that causes a previously

permissible interlock to become prohibited.

(b) Transition period. A management official described in paragraph

(a) of this section may continue to serve the depository organization

involved in the interlock for 15 months following the date of the

change in circumstances. The OCC may shorten this period under

appropriate circumstances.

Sec. 26.8 Enforcement.

Except as provided in this section, the OCC administers and

enforces the Interlocks Act with respect to national banks, District

banks, and affiliates of either, and may refer any case of a prohibited

interlocking relationship involving these entities to the Attorney

General of the United States to enforce compliance with the Interlocks

Act and this part. If an affiliate of a national bank or a District

bank is subject to the primary regulation of another Federal depository

organization supervisory agency, then the OCC does not administer and

enforce the Interlocks Act with respect to that affiliate.

Dated: July 22, 1996.

Eugene A. Ludwig,

Comptroller of the Currency.

Federal Reserve System

12 CFR Chapter II

Authority and Issuance

For the reasons set forth in the joint preamble, the Board revises

part 212 of chapter II of title 12 of the Code of Federal Regulations

to read as follows:

PART 212--MANAGEMENT OFFICIAL INTERLOCKS

Sec.

212.1 Authority, purpose, and scope.

212.2 Definitions.

212.3 Prohibitions.

212.4 Interlocking relationships permitted by statute.

212.5 Regulatory Standards exemption.

212.6 Management Consignment exemption.

212.7 Change in circumstances.

212.8 Enforcement.

212.9 Effect of Interlocks Act on Clayton Act.

Authority: 12 U.S.C. 3201-3208; 15 U.S.C. 19.

Sec. 212.1 Authority, purpose, and scope.

(a) Authority. This part is issued under the provisions of the

Depository Institution Management Interlocks Act (Interlocks Act) (12

U.S.C. 3201 et seq.), as amended.

(b) Purpose. The purpose of the Interlocks Act and this part is to

foster competition by generally prohibiting a management official from

serving two nonaffiliated depository organizations in situations where

the management interlock likely would have an anticompetitive effect.

(c) Scope. This part applies to management officials of state

member banks, bank holding companies, and their affiliates.

Sec. 212.2 Definitions.

For purposes of this part, the following definitions apply:

(a) Affiliate. (1) The term affiliate has the meaning given in

section 202 of the Interlocks Act (12 U.S.C. 3201). For purposes of

that section 202, shares held

[[Page 40303]]

by an individual include shares held by members of his or her immediate

family. ``Immediate family'' means spouse, mother, father, child,

grandchild, sister, brother, or any of their spouses, whether or not

any of their shares are held in trust.

(2) For purposes of section 202(3)(B) of the Interlocks Act (12

U.S.C. 3201(3)(B)), an affiliate relationship based on common ownership

does not exist if the Board determines, after giving the affected

persons the opportunity to respond, that the asserted affiliation was

established in order to avoid the prohibitions of the Interlocks Act

and does not represent a true commonality of interest between the

depository organizations. In making this determination, the Board

considers, among other things, whether a person, including members of

his or her immediate family, whose shares are necessary to constitute

the group owns a nominal percentage of the shares of one of the

organizations and the percentage is substantially disproportionate to

that person's ownership of shares in the other organization.

(b) Anticompetitive effect means a monopoly or substantial

lessening of competition.

(c) Area median income means:

(1) The median family income for the metropolitan statistical area

(MSA), if a depository organization is located in an MSA; or

(2) The statewide nonmetropolitan median family income, if a

depository organization is located outside an MSA.

(d) Community means a city, town, or village, and contiguous and

adjacent cities, towns, or villages.

(e) Contiguous or adjacent cities, towns, or villages means cities,

towns, or villages whose borders touch each other or whose borders are

within 10 road miles of each other at their closest points. The

property line of an office located in an unincorporated city, town, or

village is the boundary line of that city, town, or village for the

purpose of this definition.

(f) Critical, as used in Sec. 212.5, means important to restoring

or maintaining a depository organization's safe and sound operations.

(g) Depository holding company means a bank holding company or a

savings and loan holding company (as more fully defined in section 202

of the Interlocks Act (12 U.S.C. 3201)) having its principal office

located in the United States.

(h) Depository institution means a commercial bank (including a

private bank), a savings bank, a trust company, a savings and loan

association, a building and loan association, a homestead association,

a cooperative bank, an industrial bank, or a credit union, chartered

under the laws of the United States and having a principal office

located in the United States. Additionally, a United States office,

including a branch or agency, of a foreign commercial bank is a

depository institution.

(i) Depository institution affiliate means a depository institution

that is an affiliate of a depository organization.

(j) Depository organization means a depository institution or a

depository holding company.

(k) Low- and moderate-income areas means census tracts (or, if an

area is not in a census tract, block numbering areas delineated by the

United States Bureau of the Census) where the median family income is

less than 100 percent of the area median income.

(l) Management official. (1) The term management official means:

(i) A director;

(ii) An advisory or honorary director of a depository institution

with total assets of $100 million or more;

(iii) A senior executive officer as that term is defined in 12 CFR

225.71(a);

(iv) A branch manager;

(v) A trustee of a depository organization under the control of

trustees; and

(vi) Any person who has a representative or nominee, as defined in

paragraph (p) of this section, serving in any of the capacities in this

paragraph (l)(1).

(2) The term management official does not include:

(i) A person whose management functions relate exclusively to the

business of retail merchandising or manufacturing;

(ii) A person whose management functions relate principally to a

foreign commercial bank's business outside the United States; or

(iii) A person described in the provisos of section 202(4) of the

Interlocks Act (referring to an officer of a State-chartered savings

bank, cooperative bank, or trust company that neither makes real estate

mortgage loans nor accepts savings).

(m) Office means a principal or branch office of a depository

institution located in the United States. Office does not include a

representative office of a foreign commercial bank, an electronic

terminal, a loan production office, or any office of a depository

holding company.

(n) Person means a natural person, corporation, or other business

entity.

(o) Relevant metropolitan statistical area (RMSA) means an MSA, a

primary MSA, or a consolidated MSA that is not comprised of designated

Primary MSAs to the extent that these terms are defined and applied by

the Office of Management and Budget.

(p) Representative or nominee means a natural person who serves as

a management official and has an obligation to act on behalf of another

person with respect to management responsibilities. The Board will find

that a person has an obligation to act on behalf of another person only

if the first person has an agreement, express or implied, to act on

behalf of the second person with respect to management

responsibilities. The Board will determine, after giving the affected

persons an opportunity to respond, whether a person is a representative

or nominee.

(q) Total assets. (1) The term total assets means assets measured

on a consolidated basis and reported in the most recent fiscal year-end

Consolidated Report of Condition and Income.

(2) The term total assets does not include:

(i) Assets of a diversified savings and loan holding company as

defined by section 10(a)(1)(F) of the Home Owners' Loan Act (12 U.S.C.

1467a(a)(1)(F)) other than the assets of its depository institution

affiliate;

(ii) Assets of a bank holding company that is exempt from the

prohibitions of section 4 of the Bank Holding Company Act of 1956

pursuant to an order issued under section 4(d) of that Act (12 U.S.C.

1843(d)) other than the assets of its depository institution affiliate;

or

(iii) Assets of offices of a foreign commercial bank other than the

assets of its United States branch or agency.

(r) United States means the United States of America, any State or

territory of the United States of America, the District of Columbia,

Puerto Rico, Guam, American Samoa, and the Virgin Islands.

Sec. 212.3 Prohibitions.

(a) Community. A management official of a depository organization

may not serve at the same time as a management official of an

unaffiliated depository organization if the depository organizations in

question (or a depository institution affiliate thereof) have offices

in the same community.

(b) RMSA. A management official of a depository organization may

not serve at the same time as a management official of an unaffiliated

depository organization if the depository organizations in question (or

a depository institution affiliate thereof) have offices in the same

RMSA and each

[[Page 40304]]

depository organization has total assets of $20 million or more.

(c) Major assets. A management official of a depository

organization with total assets exceeding $1 billion (or any affiliate

thereof) may not serve at the same time as a management official of an

unaffiliated depository organization with total assets exceeding $500

million (or any affiliate thereof), regardless of the location of the

two depository organizations.

Sec. 212.4 Interlocking relationships permitted by statute.

The prohibitions of Sec. 212.3 do not apply in the case of any one

or more of the following organizations or to a subsidiary thereof:

(a) A depository organization that has been placed formally in

liquidation, or which is in the hands of a receiver, conservator, or

other official exercising a similar function;

(b) A corporation operating under section 25 or section 25A of the

Federal Reserve Act (12 U.S.C. 601 et seq. and 12 U.S.C. 611 et seq.,

respectively) (Edge Corporations and Agreement Corporations);

(c) A credit union being served by a management official of another

credit union;

(d) A depository organization that does not do business within the

United States except as an incident to its activities outside the

United States;

(e) A State-chartered savings and loan guaranty corporation;

(f) A Federal Home Loan Bank or any other bank organized solely to

serve depository institutions (a bankers' bank) or solely for the

purpose of providing securities clearing services and services related

thereto for depository institutions and securities companies;

(g) A depository organization that is closed or is in danger of

closing as determined by the appropriate Federal depository

institution's regulatory agency and is acquired by another depository

organization. This exemption lasts for five years, beginning on the

date the depository organization is acquired; and

(h)(1) A diversified savings and loan holding company (as defined

in section 10(a)(1)(F) of the Home Owners' Loan Act (12 U.S.C.

1467a(a)(1)(F)) with respect to the service of a director of such

company who also is a director of an unaffiliated depository

organization if:

(i) Both the diversified savings and loan holding company and the

unaffiliated depository organization notify their appropriate Federal

depository institutions regulatory agency at least 60 days before the

dual service is proposed to begin; and

(ii) The appropriate regulatory agency does not disapprove the dual

service before the end of the 60-day period.

(2) The Board may disapprove a notice of proposed service if it

finds that:

(i) The service cannot be structured or limited so as to preclude

an anticompetitive effect in financial services in any part of the

United States;

(ii) The service would lead to substantial conflicts of interest or

unsafe or unsound practices; or

(iii) The notificant failed to furnish all the information required

by the Board.

(3) The Board may require that any interlock permitted under this

paragraph (h) be terminated if a change in circumstances occurs with

respect to one of the interlocked depository organizations that would

have provided a basis for disapproval of the interlock during the

notice period.

Sec. 212.5 Regulatory Standards exemption.

(a) Criteria. The Board may permit an interlock that otherwise

would be prohibited by the Interlocks Act and Sec. 212.3 if:

(1) The board of directors of the depository organization (or the

organizers of a depository organization being formed) that seeks the

exemption provides a resolution to the Board certifying that the

organization, after the exercise of reasonable efforts, is unable to

locate any other candidate from the community or RMSA, as appropriate,

who:

(i) Possesses the level of expertise required by the depository

organization and who is not prohibited from service by the Interlocks

Act; and

(ii) Is willing to serve as a management official; and

(2) The Board, after reviewing an application submitted by the

depository organization seeking the exemption, determines that:

(i) The management official is critical to the safe and sound

operations of the affected depository organization; and

(ii) Service by the management official will not produce an

anticompetitive effect with respect to the depository organization.

(b) Presumptions. The Board applies the following presumptions when

reviewing any application for a Regulatory Standards exemption:

(1) An interlock will not have an anticompetitive effect if it

involves depository organizations that, if merged, would not cause the

post-merger Herfindahl-Hirschman Index (HHI) to exceed 1800 and would

not cause the HHI to increase by more than 200 points. This presumption

does not apply to depository organizations subject to the Major Assets

prohibition of Sec. 212.3(c).

(2) A proposed management official is critical to the safe and

sound operations of a depository institution if:

(i) That official is approved by the Board to serve as a director

or senior executive officer of that institution pursuant to 12 CFR

225.71; and

(ii) The institution had operated for less than two years, was not

in compliance with minimum capital requirements, or otherwise was in a

``troubled condition'' as defined in 12 CFR 225.71 at the time the

service under that section was approved.

(c) Duration of interlock. An interlock permitted under this

section may continue until the Board notifies the affected depository

organizations otherwise. The Board may require termination of any

interlock permitted under this section if the Board concludes, after

giving the affected persons the opportunity to respond, that the

determinations under paragraph (a)(2) of this section no longer may be

made. A management official may continue serving the depository

organization involved in the interlock for a period of 15 months

following the date of the order to terminate the interlock. The Board

may shorten this period under appropriate circumstances.

Sec. 212.6 Management Consignment exemption.

(a) Criteria. The Board may permit an interlock that otherwise

would be prohibited by the Interlocks Act and Sec. 212.3 if the Board,

after reviewing an application submitted by the depository organization

seeking an exemption, determines that the interlock would:

(1) Improve the provision of credit to low- and moderate-income

areas;

(2) Increase the competitive position of a minority- or women-owned

depository organization;

(3) Strengthen the management of a depository institution that has

been chartered for less than two years at the time an application is

filed under this part; or

(4) Strengthen the management of a depository institution that is

in an unsafe or unsound condition as determined by the Board on a case-

by-case basis.

(b) Presumptions. The Board applies the following presumptions in

reviewing any application for a Management Consignment exemption:

(1) A proposed management official is capable of strengthening the

management of a depository institution

[[Page 40305]]

described in paragraph (a)(3) of this section if that official is

approved by the Board to serve as a director or senior executive

officer of that institution pursuant to 12 CFR 225.71 and the

institution had operated for less than two years at the time the

service was approved; and

(2) A proposed management official is capable of strengthening the

management of a depository institution described in paragraph (a)(4) of

this section if the official is approved by the Board to serve as a

director or senior executive officer of the institution pursuant to 12

CFR 225.71 and the institution was not in compliance with minimum

capital requirements or otherwise was in a ``troubled condition'' as

defined under 12 CFR 225.71 at the time service was approved.

(c) Duration of interlock. An interlock granted under this section

may continue for a period of two years from the date of approval. The

Board may extend this period for one additional two-year period if the

depository organization applies for an extension at least 30 days

before the current exemption expires and satisfies one of the criteria

specified in paragraph (a) of this section. The provisions set forth in

paragraph (b) of this section also apply to applications for

extensions.

Sec. 212.7 Change in circumstances.

(a) Termination. A management official shall terminate his or her

service or apply for an exemption to the Interlocks Act if a change in

circumstances causes the service to become prohibited under that Act. A

change in circumstances may include, but is not limited to, an increase

in asset size of an organization, a change in the delineation of the

RMSA or community, the establishment of an office, an acquisition, a

merger, a consolidation, or any reorganization of the ownership

structure of a depository organization that causes a previously

permissible interlock to become prohibited.

(b) Transition period. A management official described in paragraph

(a) of this section may continue to serve the state member bank or bank

holding company involved in the interlock for 15 months following the

date of the change in circumstances. The Board may shorten this period

under appropriate circumstances.

Sec. 212.8 Enforcement.

Except as provided in this section, the Board administers and

enforces the Interlocks Act with respect to state member banks, bank

holding companies, and affiliates of either, and may refer any case of

a prohibited interlocking relationship involving these entities to the

Attorney General of the United States to enforce compliance with the

Interlocks Act and this part. If an affiliate of a state member bank or

a bank holding company is subject to the primary regulation of another

Federal depository organization supervisory agency, then the Board does

not administer and enforce the Interlocks Act with respect to that

affiliate.

Sec. 212.9 Effect of Interlocks Act on Clayton Act.

The Board regards the provisions of the first three paragraphs of

section 8 of the Clayton Act (15 U.S.C. 19) to have been supplanted by

the revised and more comprehensive prohibitions on management official

interlocks between depository organizations in the Interlocks Act.

Dated: July 10, 1996.

William W. Wiles,

Secretary of the Board.

Federal Deposit Insurance Corporation

12 CFR Chapter III

Authority and Issuance

For the reasons set forth in the joint preamble, pursuant to its

authority under section 209 of the Depository Institution Management

Interlocks Act (12 U.S.C. 3207), the Board of Directors of the FDIC

revises part 348 of chapter III of title 12 of the Code of Federal

Regulations to read as follows:

PART 348--MANAGEMENT OFFICIAL INTERLOCKS

Sec.

348.1 Authority, purpose, and scope.

348.2 Definitions.

348.3 Prohibitions.

348.4 Interlocking relationships permitted by statute.

348.5 Regulatory Standards exemption.

348.6 Management Consignment exemption.

348.7 Change in circumstances.

348.8 Enforcement.

Authority: 12 U.S.C. 3207, 12 U.S.C. 1823(k).

Sec. 348.1 Authority, purpose, and scope.

(a) Authority. This part is issued under the provisions of the

Depository Institution Management Interlocks Act (Interlocks Act) (12

U.S.C. 3201 et seq.), as amended.

(b) Purpose. The purpose of the Interlocks Act and this part is to

foster competition by generally prohibiting a management official from

serving two nonaffiliated depository organizations in situations where

the management interlock likely would have an anticompetitive effect.

(c) Scope. This part applies to management officials of insured

nonmember banks and their affiliates.

Sec. 348.2 Definitions.

For purposes of this part, the following definitions apply:

(a) Affiliate. (1) The term affiliate has the meaning given in

section 202 of the Interlocks Act (12 U.S.C. 3201). For purposes of

section 202, shares held by an individual include shares held by

members of his or her immediate family. ``Immediate family'' means

spouse, mother, father, child, grandchild, sister, brother or any of

their spouses, whether or not any of their shares are held in trust.

(2) For purposes of section 202(3)(B) of the Interlocks Act (12

U.S.C. 3201(3)(B)), an affiliate relationship involving an insured

nonmember bank based on common ownership does not exist if the FDIC

determines, after giving the affected persons the opportunity to

respond, that the asserted affiliation was established in order to

avoid the prohibitions of the Interlocks Act and does not represent a

true commonality of interest between the depository organizations. In

making this determination, the FDIC considers, among other things,

whether a person, including members of his or her immediate family

whose shares are necessary to constitute the group, owns a nominal

percentage of the shares of one of the organizations and the percentage

is substantially disproportionate to that person's ownership of shares

in the other organization.

(b) Anticompetitive effect means a monopoly or substantial

lessening of competition.

(c) Area median income means:

(1) The median family income for the metropolitan statistical area

(MSA), if a depository organization is located in an MSA; or

(2) The statewide nonmetropolitan median family income, if a

depository organization is located outside an MSA.

(d) Community means a city, town, or village, and contiguous or

adjacent cities, towns, or villages.

(e) Contiguous or adjacent cities, towns, or villages means cities,

towns, or villages whose borders touch each other or whose borders are

within 10 road miles of each other at their closest points. The

property line of an office located in an unincorporated city, town, or

village is the boundary line of that city, town, or village for the

purpose of this definition.

(f) Critical means important to restoring or maintaining a

depository

[[Page 40306]]

organization's safe and sound operations.

(g) Depository holding company means a bank holding company or a

savings and loan holding company (as more fully defined in section 202

of the Interlocks Act (12 U.S.C. 3201)) having its principal office

located in the United States.

(h) Depository institution means a commercial bank (including a

private bank), a savings bank, a trust company, a savings and loan

association, a building and loan association, a homestead association,

a cooperative bank, an industrial bank, or a credit union, chartered

under the laws of the United States and having a principal office

located in the United States. Additionally, a United States office,

including a branch or agency, of a foreign commercial bank is a

depository institution.

(i) Depository institution affiliate means a depository institution

that is an affiliate of a depository organization.

(j) Depository organization means a depository institution or a

depository holding company.

(k) Low- and moderate-income areas means census tracts (or, if an

area is not in a census tract, block numbering areas delineated by the

United States Bureau of the Census) where the median family income is

less than 100 percent of the area median income.

(l) Management official. (1) The term management official means:

(i) A director;

(ii) An advisory or honorary director of a depository institution

with total assets of $100 million or more;

(iii) A senior executive officer as that term is defined in 12 CFR

303.14(a)(3);

(iv) A branch manager;

(v) A trustee of a depository organization under the control of

trustees; and

(vi) Any person who has a representative or nominee serving in any

of the capacities in this paragraph (l)(1).

(2) The term management official does not include:

(i) A person whose management functions relate exclusively to the

business of retail merchandising or manufacturing;

(ii) A person whose management functions relate principally to the

business outside the United States of a foreign commercial bank; or

(iii) A person described in the provisos of section 202(4) of the

Interlocks Act (12 U.S.C. 3201(4)) (referring to an officer of a State-

chartered savings bank, cooperative bank, or trust company that neither

makes real estate mortgage loans nor accepts savings).

(m) Office means a principal or branch office of a depository

institution located in the United States. Office does not include a

representative office of a foreign commercial bank, an electronic

terminal, or a loan production office.

(n) Person means a natural person, corporation, or other business

entity.

(o) Relevant metropolitan statistical area (RMSA) means an MSA, a

primary MSA, or a consolidated MSA that is not comprised of designated

Primary MSAs to the extent that these terms are defined and applied by

the Office of Management and Budget.

(p) Representative or nominee means a natural person who serves as

a management official and has an obligation to act on behalf of another

person with respect to management responsibilities. The FDIC will find

that a person has an obligation to act on behalf of another person only

if the first person has an agreement, express or implied, to act on

behalf of the second person with respect to management

responsibilities. The FDIC will determine, after giving the affected

persons an opportunity to respond, whether a person is a representative

or nominee.

(q) Total assets. (1) The term total assets includes assets

measured on a consolidated basis and reported in the most recent fiscal

year-end Consolidated Report of Condition and Income.

(2) The term total assets does not include:

(i) Assets of a diversified savings and loan holding company as

defined by section 10(a)(1)(F) of the Home Owners' Loan Act (12 U.S.C.

1467a(a)(1)(F)) other than the assets of its depository institution

affiliate;

(ii) Assets of a bank holding company that are exempt from the

prohibitions of section 4 of the Bank Holding Company Act of 1956

pursuant to an order issued under section 4(d) of that Act (12 U.S.C.

1843(d)) other than the assets of its depository institution affiliate;

or

(iii) Assets of offices of a foreign commercial bank other than the

assets of its United States branch or agency.

(r) United States means the United States of America, any State or

territory of the United States of America, the District of Columbia,

Puerto Rico, Guam, American Samoa, and the Virgin Islands.

Sec. 348.3 Prohibitions.

(a) Community. A management official of a depository organization

may not serve at the same time as a management official of an

unaffiliated depository organization if the depository organizations in

question (or a depository institution affiliate thereof) have offices

in the same community.

(b) RMSA. A management official of a depository organization may

not serve at the same time as a management official of an unaffiliated

depository organization if the depository organizations in question (or

a depository institution affiliate thereof) have offices in the same

RMSA and each depository organization has total assets of $20 million

or more.

(c) Major assets. A management official of a depository

organization with total assets exceeding $1 billion (or any affiliate

thereof) may not serve at the same time as a management official of an

unaffiliated depository organization with total assets exceeding $500

million (or any affiliate thereof), regardless of the location of the

two depository organizations.

Sec. 348.4 Interlocking relationships permitted by statute.

The prohibitions of Sec. 348.3 do not apply in the case of any one

or more of the following organizations or to a subsidiary thereof:

(a) A depository organization that has been placed formally in

liquidation, or which is in the hands of a receiver, conservator, or

other official exercising a similar function;

(b) A corporation operating under section 25 or section 25A of the

Federal Reserve Act (12 U.S.C. 601 et seq. and 12 U.S.C. 611 et seq.,

respectively) (Edge Corporations and Agreement Corporations);

(c) A credit union being served by a management official of another

credit union;

(d) A depository organization that does not do business within the

United States except as an incident to its activities outside the

United States;

(e) A State-chartered savings and loan guaranty corporation;

(f) A Federal Home Loan bank or any other bank organized solely to

serve depository institutions (a bankers' bank) or solely for the

purpose of providing securities clearing services and services related

thereto for depository institutions and securities companies;

(g) A depository organization that is closed or is in danger of

closing as determined by the appropriate Federal depository

institutions regulatory agency and is acquired by another depository

organization. This exemption lasts for five years, beginning on the

date the depository organization is acquired;

(h) A savings association whose acquisition has been authorized on

an emergency basis in accordance with section 13(k) of the Federal

Deposit

[[Page 40307]]

Insurance Act (12 U.S.C. 1823(k)) with resulting dual service by a

management official that would otherwise be prohibited under the

Interlocks Act which may continue for up to 10 years from the date of

the acquisition provided that the FDIC has given its approval for the

continuation of such service; and

(i)(1) A diversified savings and loan holding company (as defined

in section 10(a)(1)(F) of the Home Owners' Loan Act (12 U.S.C.

1467a(a)(1)(F)) with respect to the service of a director of such

company who is also a director of an unaffiliated depository

organization if:

(i) Both the diversified savings and loan holding company and the

unaffiliated depository organization notify their appropriate Federal

depository institutions regulatory agency at least 60 days before the

dual service is proposed to begin; and

(ii) The appropriate regulatory agency does not disapprove the dual

service before the end of the 60-day period.

(2) The FDIC may disapprove a notice of proposed service if it

finds that:

(i) The service cannot be structured or limited so as to preclude

an anticompetitive effect in financial services in any part of the

United States;

(ii) The service would lead to substantial conflicts of interest or

unsafe or unsound practices; or

(iii) The notificant failed to furnish all the information required

by the FDIC.

(3) The FDIC may require that any interlock permitted under this

paragraph (h) be terminated if a change in circumstances occurs with

respect to one of the interlocked depository organizations that would

have provided a basis for disapproval of the interlock during the

notice period.

Sec. 348.5 Regulatory Standards exemption.

(a) Criteria. The FDIC may permit an interlock that otherwise would

be prohibited by the Interlocks Act and Sec. 348.3 if:

(1) The board of directors of the depository organization (or the

organizers of a depository organization being formed) that seeks the

exemption provides a resolution to the FDIC certifying that the

organization, after the exercise of reasonable efforts, is unable to

locate any other candidate from the community or RMSA, as appropriate,

who:

(i) Possesses the level of expertise required by the depository

organization and who is not prohibited from service by the Interlocks

Act; and

(ii) Is willing to serve as a management official; and

(2) The FDIC, after reviewing an application submitted by the

depository organization seeking the exemption, determines that:

(i) The management official is critical to the safe and sound

operations of the affected depository organization; and

(ii) Service by the management official will not produce an

anticompetitive effect with respect to the depository organization.

(b) Presumptions. The FDIC applies the following presumptions when

reviewing any application for a Regulatory Standards exemption:

(1) An interlock will not have an anticompetitive effect if it

involves depository organizations that, if merged, would not cause the

post-merger Herfindahl-Hirschman Index (HHI) to exceed 1800 and would

not cause the HHI to increase by more than 200 points. This presumption

shall not apply to depository organizations subject to the Major Assets

prohibition of Sec. 348.3(c).

(2) A proposed management official is critical to the safe and

sound operations of a depository institution if:

(i) That official is approved by the FDIC to serve as a director or

a senior executive officer of that institution pursuant to 12 CFR

303.14; and

(ii) The institution had operated for less than two years, was not

in compliance with minimum capital requirements, or otherwise was in a

``troubled condition'' as defined by 12 CFR 303.14(a)(4) at the time

the service under that section was approved.

(c) Duration of interlock. An interlock permitted under this

section may continue until the FDIC notifies the affected depository

organizations otherwise. The FDIC may require termination of any

interlock permitted under this section if the FDIC concludes, after

giving the affected persons the opportunity to respond, that the

determinations under paragraph (a)(2) of this section no longer may be

made. A management official may continue serving the depository

organization involved in the interlock for a period of 15 months

following the date of the order to terminate the interlock. The FDIC

may shorten this period under appropriate circumstances.

Sec. 348.6 Management Consignment exemption.

(a) Criteria. The FDIC may permit an interlock that otherwise would

be prohibited by the Interlocks Act and Sec. 348.3 if the FDIC, after

reviewing an application submitted by the depository organization

seeking an exemption, determines that the interlock would:

(1) Improve the provision of credit to low- and moderate-income

areas;

(2) Increase the competitive position of a minority- or women-owned

depository organization;

(3) Strengthen the management of a depository institution that has

been chartered for less than two years at the time an application is

filed under this part; or

(4) Strengthen the management of a depository institution that is

in an unsafe or unsound condition as determined by the FDIC on a case-

by-case basis.

(b) Presumptions. The FDIC applies the following presumptions when

reviewing any application for a Management Consignment exemption:

(1) A proposed management official is capable of strengthening the

management of a depository institution described in paragraph (a)(3) of

this section if that official is approved by the FDIC to serve as a

director or a senior executive officer of that institution pursuant to

12 CFR 303.14 and the institution had operated for less than two years

at the time the service under 12 CFR 303.14 was approved; and

(2) A proposed management official is capable of strengthening the

management of a depository institution described in paragraph (a)(4) of

this section if that official is approved by the FDIC to serve as a

director or a senior executive officer of that institution pursuant to

12 CFR 303.14 and the institution was not in compliance with minimum

capital requirements or otherwise was in a ``troubled condition'' as

defined under 12 CFR 303.14 at the time service under that section was

approved.

(c) Duration of interlock. An interlock granted under this section

may continue for a period of two years from the date of approval. The

FDIC may extend this period for one additional two-year period if the

depository organization applies for an extension at least 30 days

before the current exemption expires and satisfies one of the criteria

specified in paragraph (a) of this section. The provisions set forth in

paragraph (b) of this section also apply to applications for

extensions.

Sec. 348.7 Change in circumstances.

(a) Termination. A management official shall terminate his or her

service or apply for an exemption to the Interlocks Act if a change in

circumstances causes the service to become prohibited under that Act. A

change in circumstances may include, but is not limited to, an increase

in asset size of an organization, a change in the delineation of the

RMSA or community, the establishment of an office, an acquisition, a

merger, a consolidation,

[[Page 40308]]

or any reorganization of the ownership structure of a depository

organization that causes a previously permissible interlock to become

prohibited.

(b) Transition period. A management official described in paragraph

(a) of this section may continue to serve the insured nonmember bank

involved in the interlock for 15 months following the date of the

change in circumstances. The FDIC may shorten this period under

appropriate circumstances.

Sec. 348.8 Enforcement.

Except as provided in this section, the FDIC administers and

enforces the Interlocks Act with respect to insured nonmember banks and

their affiliates and may refer any case of a prohibited interlocking

relationship involving these entities to the Attorney General of the

United States to enforce compliance with the Interlocks Act and this

part. If an affiliate of an insured nonmember bank is subject to the

primary regulation of another federal depository organization

supervisory agency, then the FDIC does not administer and enforce the

Interlocks Act with respect to that affiliate.

Dated at Washington, DC, this 16th day of July, 1996.

By order of the Board of Directors.

Federal Deposit Insurance Corporation

Robert E. Feldman,

Deputy Executive Secretary.

Office of Thrift Supervision

12 CFR Chapter V

Authority and Issuance

For the reasons set out in the joint preamble, the OTS revises part

563f of chapter V of title 12 of the Code of Federal Regulations to

read as follows:

PART 563f--MANAGEMENT OFFICIAL INTERLOCKS

Sec.

563f.1 Authority, purpose, and scope.

563f.2 Definitions.

563f.3 Prohibitions.

563f.4 Interlocking relationships permitted by statute.

563f.5 Regulatory Standards exemption.

563f.6 Management Consignment exemption.

563f.7 Change in circumstances.

563f.8 Enforcement.

563f.9 Interlocking relationships permitted pursuant to Federal

Deposit Insurance Act.

Authority: 12 U.S.C. 3201-3208.

Sec. 563f.1 Authority, purpose, and scope.

(a) Authority. This part is issued under the provisions of the

Depository Institution Management Interlocks Act (Interlocks Act) (12

U.S.C. 3201 et seq.), as amended.

(b) Purpose. The purpose of the Interlocks Act and this part is to

foster competition by generally prohibiting a management official from

serving two nonaffiliated depository organizations in situations where

the management interlock likely would have an anticompetitive effect.

(c) Scope. This part applies to management officials of savings

associations, savings and loan holding companies, and affiliates of

either.

Sec. 563f.2 Definitions.

For purposes of this part, the following definitions apply:

(a) Affiliate. (1) The term affiliate has the meaning given in

section 202 of the Interlocks Act (12 U.S.C. 3201). For purposes of

that section 202, shares held by an individual include shares held by

members of his or her immediate family. ``Immediate family'' means

spouse, mother, father, child, grandchild, sister, brother, or any of

their spouses, whether or not any of their shares are held in trust.

(2) For purposes of section 202(3)(B) of the Interlocks Act (12

U.S.C. 3201(3)(B)), an affiliate relationship involving a savings

association or savings and loan holding company based on common

ownership does not exist if the OTS determines, after giving the

affected persons the opportunity to respond, that the asserted

affiliation was established in order to avoid the prohibitions of the

Interlocks Act and does not represent a true commonality of interest

between the depository organizations. In making this determination, the

OTS considers, among other things, whether a person, including members

of his or her immediate family, whose shares are necessary to

constitute the group owns a nominal percentage of the shares of one of

the organizations and the percentage is substantially disproportionate

to that person's ownership of shares in the other organization.

(b) Anticompetitive effect means a monopoly or substantial

lessening of competition.

(c) Area median income means:

(1) The median family income for the metropolitan statistical area

(MSA), if a depository organization is located in an MSA; or

(2) The statewide nonmetropolitan median family income, if a

depository organization is located outside an MSA.

(d) Community means a city, town, or village, and contiguous or

adjacent cities, towns, or villages.

(e) Contiguous or adjacent cities, towns, or villages means cities,

towns, or villages whose borders touch each other or whose borders are

within 10 road miles of each other at their closest points. The

property line of an office located in an unincorporated city, town, or

village is the boundary line of that city, town, or village for the

purpose of this definition.

(f) Critical means important to restoring or maintaining a

depository organization's safe and sound operations.

(g) Depository holding company means a bank holding company or a

savings and loan holding company (as more fully defined in section 202

of the Interlocks Act (12 U.S.C. 3201)) having its principal office

located in the United States.

(h) Depository institution means a commercial bank (including a

private bank), a savings bank, a trust company, a savings and loan

association, a building and loan association, a homestead association,

a cooperative bank, an industrial bank, or a credit union, chartered

under the laws of the United States and having a principal office

located in the United States. Additionally, a United States office,

including a branch or agency, of a foreign commercial bank is a

depository institution.

(i) Depository institution affiliate means a depository institution

that is an affiliate of a depository organization.

(j) Depository organization means a depository institution or a

depository holding company.

(k) Low- and moderate-income areas means census tracts (or, if an

area is not in a census tract, block numbering areas delineated by the

United States Bureau of the Census) where the median family income is

less than 100 percent of the area median income.

(l) Management official. (1) The term management official means:

(i) A director;

(ii) An advisory or honorary director of a depository institution

with total assets of $100 million or more;

(iii) A senior executive officer as that term is defined in 12 CFR

574.9(a)(2);

(iv) A branch manager;

(v) A trustee of a depository organization under the control of

trustees; and

(vi) Any person who has a representative or nominee serving in any

of the capacities in this paragraph (l)(1).

(2) The term management official does not include:

(i) A person whose management functions relate exclusively to the

business of retail merchandising or manufacturing;

(ii) A person whose management functions relate principally to the

[[Page 40309]]

business outside the United States of a foreign commercial bank; or

(iii) A person described in the provisos of section 202(4) of the

Interlocks Act (12 U.S.C. 3201(4)) (referring to an officer of a State-

chartered savings bank, cooperative bank, or trust company that neither

makes real estate mortgage loans nor accepts savings).

(m) Office means a principal or branch office of a depository

institution located in the United States. Office does not include a

representative office of a foreign commercial bank, an electronic

terminal, or a loan production office.

(n) Person means a natural person, corporation, or other business

entity.

(o) Relevant metropolitan statistical area (RMSA) means an MSA, a

primary MSA, or a consolidated MSA that is not comprised of designated

Primary MSAs to the extent that these terms are defined and applied by

the Office of Management and Budget.

(p) Representative or nominee means a natural person who serves as

a management official and has an obligation to act on behalf of another

person with respect to management responsibilities. The OTS will find

that a person has an obligation to act on behalf of another person only

if the first person has an agreement, express or implied, to act on

behalf of the second person with respect to management

responsibilities. The OTS will determine, after giving the affected

persons an opportunity to respond, whether a person is a representative

or nominee.

(q) Savings association means:

(1) Any Federal savings association (as defined in section 3(b)(2)

of the Federal Deposit Insurance Act (12 U.S.C. 1813(b)(2));

(2) Any state savings association (as defined in section 3(b)(3) of

the Federal Deposit Insurance Act (12 U.S.C. 1813(b)(3)) the deposits

of which are insured by the Federal Deposit Insurance Corporation; and

(3) Any corporation (other than a bank as defined in section

3(a)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1813(a)(1)) the

deposits of which are insured by the Federal Deposit Insurance

Corporation, that the Board of Directors of the Federal Deposit

Insurance Corporation and the Director of the Office of Thrift

Supervision jointly determine to be operating in substantially the same

manner as a savings association.

(r) Total assets. (1) The term total assets means assets measured

on a consolidated basis and reported in the most recent fiscal year-end

Consolidated Report of Condition and Income.

(2) The term total assets does not include:

(i) Assets of a diversified savings and loan holding company as

defined by section 10(a)(1)(F) of the Home Owners' Loan Act (12 U.S.C.

1467a(a)(1)(F)) other than the assets of its depository institution

affiliate;

(ii) Assets of a bank holding company that is exempt from the

prohibitions of section 4 of the Bank Holding Company Act of 1956

pursuant to an order issued under section 4(d) of that Act (12 U.S.C.

1843(d)) other than the assets of its depository institution affiliate;

or

(iii) Assets of offices of a foreign commercial bank other than the

assets of its United States branch or agency.

(s) United States means the United States of America, any State or

territory of the United States of America, the District of Columbia,

Puerto Rico, Guam, American Samoa, and the Virgin Islands.

Sec. 563f.3 Prohibitions.

(a) Community. A management official of a depository organization

may not serve at the same time as a management official of an

unaffiliated depository organization if the depository organizations in

question (or a depository institution affiliate thereof) have offices

in the same community.

(b) RMSA. A management official of a depository organization may

not serve at the same time as a management official of an unaffiliated

depository organization if the depository organizations in question (or

a depository institution affiliate thereof) have offices in the same

RMSA and each depository organization has total assets of $20 million

or more.

(c) Major assets. A management official of a depository

organization with total assets exceeding $1 billion (or any affiliate

thereof) may not serve at the same time as a management official of an

unaffiliated depository organization with total assets exceeding $500

million (or any affiliate thereof), regardless of the location of the

two depository organizations.

Sec. 563f.4 Interlocking relationships permitted by statute.

The prohibitions of Sec. 563f.3 do not apply in the case of any one

or more of the following organizations or to a subsidiary thereof:

(a) A depository organization that has been placed formally in

liquidation, or which is in the hands of a receiver, conservator, or

other official exercising a similar function;

(b) A corporation operating under section 25 or section 25A of the

Federal Reserve Act (12 U.S.C. 601 et seq. and 12 U.S.C. 611 et seq.,

respectively) (Edge Corporations and Agreement Corporations);

(c) A credit union being served by a management official of another

credit union;

(d) A depository organization that does not do business within the

United States except as an incident to its activities outside the

United States;

(e) A State-chartered savings and loan guaranty corporation;

(f) A Federal Home Loan Bank or any other bank organized solely to

serve depository institutions (a bankers' bank) or solely for the

purpose of providing securities clearing services and services related

thereto for depository institutions and securities companies;

(g) A depository organization that is closed or is in danger of

closing as determined by the appropriate Federal depository

institutions regulatory agency and is acquired by another depository

organization. This exemption lasts for five years, beginning on the

date the depository organization is acquired;

(h)(1) A diversified savings and loan holding company (as defined

in section 10(a)(1)(F) of the Home Owners' Loan Act (12 U.S.C.

1467a(a)(1)(F)) with respect to the service of a director of such

company who also is a director of an unaffiliated depository

organization if:

(i) Both the diversified savings and loan holding company and the

unaffiliated depository organization notify their appropriate Federal

depository institutions regulatory agency at least 60 days before the

dual service is proposed to begin; and

(ii) The appropriate regulatory agency does not disapprove the dual

service before the end of the 60-day period.

(2) The OTS may disapprove a notice of proposed service if it finds

that:

(i) The service cannot be structured or limited so as to preclude

an anticompetitive effect in financial services in any part of the

United States;

(ii) The service would lead to substantial conflicts of interest or

unsafe or unsound practices; or

(iii) The notificant failed to furnish all the information required

by the OTS.

(3) The OTS may require that any interlock permitted under this

paragraph (h) be terminated if a change in circumstances occurs with

respect to one of the interlocked depository organizations that would

have provided a basis for disapproval of the interlock during the

notice period; and

(i) Any savings association or any savings and loan holding company

(as defined in section 10(a)(1)(D) of the Home Owners' Loan Act) which

has

[[Page 40310]]

issued stock in connection with a qualified stock issuance pursuant to

section 10(q) of such Act, except that this paragraph (i) shall apply

only with regard to service by a single management official of such

savings association or holding company, or any subsidiary of such

savings association or holding company, by a single management official

of the savings and loan holding company which purchased the stock

issued in connection with such qualified stock issuance, and shall

apply only when the OTS has determined that such service is consistent

with the purposes of the Interlocks Act and the Home Owners' Loan Act.

Sec. 563f.5 Regulatory Standards exemption.

(a) Criteria. The OTS may permit an interlock that otherwise would

be prohibited by the Interlocks Act and Sec. 563f.3 if:

(1) The board of directors of the depository organization (or the

organizers of a depository organization being formed) that seeks the

exemption provides a resolution to the OTS certifying that the

organization, after the exercise of reasonable efforts, is unable to

locate any other candidate from the community or RMSA, as appropriate,

who:

(i) Possesses the level of expertise required by the depository

organization and who is not prohibited from service by the Interlocks

Act; and

(ii) Is willing to serve as a management official; and

(2) The OTS, after reviewing an application submitted by the

depository organization seeking the exemption, determines that:

(i) The management official is critical to the safe and sound

operations of the affected depository organization; and

(ii) Service by the management official will not produce an

anticompetitive effect with respect to the depository organization.

(b) Presumptions. The OTS applies the following presumptions when

reviewing any application for a Regulatory Standards exemption:

(1) An interlock will not have an anticompetitive effect if it

involves depository organizations that, if merged, would not cause the

post-merger Herfindahl-Hirschman Index (HHI) to exceed 1800 and would

not cause the HHI to increase by more than 200 points. This presumption

shall not apply to depository organizations subject to the Major Assets

prohibition of Sec. 563f.3(c).

(2) A proposed management official is critical to the safe and

sound operations of a depository institution if:

(i) That official is approved by the OTS to serve as a director or

senior executive officer of that institution pursuant to 12 CFR 574.9;

and

(ii) The institution had operated for less than two years, was not

in compliance with minimum capital requirements, or otherwise was in a

``troubled condition'' as defined in 12 CFR 574.9 at the time the

service under that section was approved.

(c) Duration of interlock. An interlock permitted under this

section may continue until the OTS notifies the affected depository

organizations otherwise. The OTS may require termination of any

interlock permitted under this section if the OTS concludes, after

giving the affected persons the opportunity to respond, that the

determinations under paragraph (a)(2) of this section no longer may be

made. A management official may continue serving the depository

organization involved in the interlock for a period of 15 months

following the date of the order to terminate the interlock, unless the

order terminating the interlock provides otherwise.

Sec. 563f.6 Management Consignment exemption.

(a) Criteria. The OTS may permit an interlock that otherwise would

be prohibited by the Interlocks Act and Sec. 563f.3 if the OTS, after

reviewing an application submitted by the depository organization

seeking an exemption, determines that the interlock would:

(1) Improve the provision of credit to low- and moderate-income

areas;

(2) Increase the competitive position of a minority- or women-owned

depository organization;

(3) Strengthen the management of a depository institution that has

been chartered for less than three years at the time an application is

filed under this part; or

(4) Strengthen the management of a depository institution that is

in an unsafe or unsound condition as determined by the OTS on a case-

by-case basis.

(b) Presumptions. The OTS applies the following presumptions when

reviewing any application for a Management Consignment exemption:

(1) A proposed management official is capable of strengthening the

management of a depository institution described in paragraph (a)(3) of

this section if that official is approved by the OTS to serve as a

director or senior executive officer of that institution pursuant to 12

CFR 574.9 and the institution had operated for less than two years at

the time the service under 12 CFR 574.9 was approved; and

(2) A proposed management official is capable of strengthening the

management of a depository institution described in paragraph (a)(4) of

this section if that official is approved by the OTS to serve as a

director or senior executive officer of that institution pursuant to 12

CFR 574.9 and the institution was not in compliance with minimum

capital requirements or otherwise was in a ``troubled condition'' as

defined under 12 CFR 574.9 at the time service under that section was

approved.

(c) Duration of interlock. An interlock granted under this section

may continue for a period of two years from the date of approval. The

OTS may extend this period for one additional two-year period if the

depository organization applies for an extension at least 30 days

before the current exemption expires and satisfies one of the criteria

specified in paragraph (a) of this section. The provisions set forth in

paragraph (b) of this section also apply to applications for

extensions.

Sec. 563f.7 Change in circumstances.

(a) Termination. A management official shall terminate his or her

service or apply for an exemption to the Interlocks Act if a change in

circumstances causes the service to become prohibited under that Act. A

change in circumstances may include, but is not limited to, an increase

in asset size of an organization, a change in the delineation of the

RMSA or community, the establishment of an office, an acquisition, a

merger, a consolidation, or any reorganization of the ownership

structure of a depository organization that causes a previously

permissible interlock to become prohibited.

(b) Transition period. A management official described in paragraph

(a) of this section may continue to serve the depository organization

involved in the interlock for 15 months following the date of the

change in circumstances. The OTS may shorten this period under

appropriate circumstances.

Sec. 563f.8 Enforcement.

Except as provided in this section, the OTS administers and

enforces the Interlocks Act with respect to savings associations,

savings and loan holding companies, and affiliates of either, and may

refer any case of a prohibited interlocking relationship involving

these entities to the Attorney General of the United States to enforce

compliance with the Interlocks Act and this part. If an affiliate of a

savings association or savings and loan holding company is subject to

the primary regulation of another Federal depository organization

[[Page 40311]]

supervisory agency, then the OTS does not administer and enforce the

Interlocks Act with respect to that affiliate.

Sec. 563f.9 Interlocking relationships permitted pursuant to Federal

Deposit Insurance Act.

A management official or prospective management official of a

depository organization may enter into an otherwise prohibited

interlocking relationship with another depository organization for a

period of up to 10 years if such relationship is approved by the

Federal Deposit Insurance Corporation pursuant to section

13(k)(1)(A)(v) of the Federal Deposit Insurance Act, as amended (12

U.S.C. 1823(k)(1)(A)(v)).

Dated: July 1, 1996.

Jonathan L. Fiechter,

Acting Director.

[FR Doc. 96-19400 Filed 8-1-96; 8:45 am]

BILLING CODE 4810-33-P; 6210-01-P; 6714-01-P; 6720-01-P