Management Official Interlocks

NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 711

Management Official Interlocks

AGENCY: National Credit Union Administration.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The National Credit Union Administration (NCUA) proposes to

revise its rule regarding management interlocks. The proposal conforms

the interlocks rule to recent statutory changes, and was drafted

through a coordinated effort among the following other federal

financial regulatory agencies; 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

[[Page 57946]]

(OTS). The proposal also modernizes and clarifies the rule, and reduces

unnecessary regulatory burdens where feasible, consistent with

statutory requirements.

DATES: Comments must be received on or before January 27, 1999.

ADDRESSES: Direct comments to Becky Baker, Secretary of the Board. Mail

or hand-deliver comments to: National Credit Union Administration, 1775

Duke Street, Alexandria, Virginia 22314-3428. Fax comments to (703)

518-6319. E-mail comments to [email protected]. Please send comments

by one method only.

FOR FURTHER INFORMATION CONTACT: Dianne M. Salva, Staff Attorney,

Division of Operations, Office of General Counsel, at the above address

or telephone: (703) 518-6540.

SUPPLEMENTARY INFORMATION:

I. Background

The Depository Institution Management Interlocks Act (12 U.S.C.

3201-3208) (the Interlocks Act) generally prohibits financial

institution management officials from serving simultaneously with two

unaffiliated depository institutions or their holding companies

(depository organizations). The Interlocks Act exempts interlocking

arrangements between credit unions and, therefore, in the case of

credit unions, only restricts interlocks between credit unions and

other institutions--banks and thrifts and their holding companies.

The scope of the prohibition depends on the size and location of

the involved organizations. For instance, the Interlocks Act prohibits

unaffiliated depository organizations, regardless of size, from

establishing an interlock if both organizations have an office in the

same community (the community prohibition). Unaffiliated depository

organizations may not form an interlock if both organizations have

total assets of $20 million or more and are located in the same

Relevant Metropolitan Statistical Area (RMSA) (the RMSA prohibition).

The Interlocks Act also prohibits unaffiliated depository

organizations, regardless of location, from establishing an interlock

if each organization has total assets exceeding specified thresholds

(the major assets prohibition).

Section 2210 of the Economic Growth and Regulatory Paperwork

Reduction Act of 1996 (EGRPR Act) amended Secs. 204, 206, and 209 of

the Interlocks Act (12 U.S.C. 3203, 3205 and 3207).\1\

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\1\ The OCC, the Board, the FDIC, and the OTS, (collectively,

the Agencies) have recently proposed rules similar to NCUA to

implement the EGRPR Act. 63 FR 43052 (August 11, 1998).

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Section 2210(a) of EGRPR Act amended the Interlocks Act by changing

the thresholds for the major assets prohibition under 12 U.S.C. 3203.

Prior to the EGRPR Act, management officials of depository

organizations with total assets exceeding $1 billion were prohibited

from serving as management officials of unaffiliated depository

organizations with assets exceeding $500 million, regardless of the

location of the organizations or their depository institution

affiliates.\2\ The EGRPR Act raised the thresholds to $2.5 billion and

$1.5 billion, respectively. The revision also authorized NCUA to adjust

the thresholds by regulation, as necessary to allow for inflation or

market conditions.

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\2\ The Agencies, and NCUAA, define ``total assets'' of

diversified savings and loan holding companies and bank holding

companies exempt from Sec. 4 of the Bank Holding Company Act to

include only the assets of their depository institution affiliates.

See 12 CFR 26.2(r), 212.2(q), 348.2(q), 711.2(r), and 563f.2(r).

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

grandfather and diversified savings and loan holding company exemptions

in 12 U.S.C. 3205. Prior to the EGRPR Act, these exemptions were

subject to a 20-year time limit beginning November 10, 1978. The EGRPR

Act amended Sec. 3205(a) to permit persons who began dual service as

management officials of more than one depository organization before

November 10, 1978, to continue such service indefinitely. Similarly,

Sec. 3205(b) was amended to permit a person who serves as a management

official of a depository organization and of a company that is not a

depository holding company to continue to serve as an official of both

entities indefinitely if the non-depository organization becomes a

diversified savings and loan holding company. The EGRPR Act also

repealed Sec. 3205(c). That provision, which mandated agency review of

grandfathered interlocks before March 1995, became outdated.

The EGRPR Act also amended 12 U.S.C. 3207 to provide that NCUA may

adopt ``regulations that permit service by a management official that

would otherwise be prohibited by [the community, RMSA, or major assets

prohibitions], if such service would not result in a monopoly or

substantial lessening of competition.'' This change repealed the

specific ``regulatory standards'' and ``management consignment''

exemptions added by the Riegle Community Development and Regulatory

Improvement Act of 1994 (CDRI Act),\3\ and restored the NCUA's broad

authority to create regulatory exemptions to the statutory prohibitions

on interlocks.

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\3\ NCUA adopted final regulations implementing the management

interlocks provision of CDRI Act, effective October 1, 1996. See 61

FR 50702 (September 27, 1996). The Agencies also adopted final

regulations implementing the management interlocks provisions of the

CDRI Act, effective October 1, 1996. See 61 FR 40293 (August 2,

1996).

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II. Discussion of Proposed Regulations

The proposal reflects these statutory changes. This proposal also

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

been advanced by the FRB, OCC and FDIC before enactment of the CDRI

Act. NCUA invites comments on all aspects of this proposal.

A. Definitions

Current NCUA regulations define key terms implementing the

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

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

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

become unnecessary and would be removed.

Anticompetitive Effect

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

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

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

gauging whether to grant an exemption under NCUA's general exemptive

authority. Because the proposed regulations would employ this phrase in

only one provision, a separate definition is unnecessary.

Critical

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

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

the EGRPR Act eliminates the Regulatory Standards exemption, a

regulatory definition of ``critical'' is unnecessary.

B. Major Assets Prohibition

Prior to the EGRPR Act, a management official of a depository

organization (or its affiliates) having total assets exceeding $1

billion could not serve as a management official of any depository

organization with total assets exceeding $500 million (or its

affiliates) regardless of location. The EGRPR Act revised the asset

thresholds for the major assets prohibition from $1 billion and $500

million to $2.5 billion and $1.5 billion, respectively. The legislation

also authorized the NCUA to adjust the threshold from time to time to

reflect inflation or market changes.

[[Page 57947]]

The proposal would amend the regulations to reflect the new

threshold amounts and add a mechanism providing for periodic

adjustments of the thresholds. The adjustment would be based on changes

in the Consumer Price Index for Urban Wage Earners and Clerical Workers

(the Consumer Price Index). In years when changes in the Consumer Price

Index would change the thresholds by more than $100 million, NCUA will

announce the change by notice published in the Federal Register in

December. NCUA also invites comment on the types of market changes that

may warrant subsequent adjustments to the major assets prohibition.

C. Regulatory Standards and Management Consignment Exemptions

The current regulations contain Regulatory Standards and Management

Consignment exemptions, which were predicated on Sec. 3207 of the CDRI

Act. The EGRPR Act removed the exemptions from the Interlocks Act and

substituted a general authority for NCUA to create exemptions by

regulation. Accordingly, these regulatory exemptions would be removed

by the proposed rule.

D. General Exemptive Authority

Section 2210(c) of the EGRPR Act authorizes NCUA to adopt

regulations permitting service by a management official that would

otherwise be prohibited by the Interlocks Act, if such service would

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

To implement this authority, NCUA is proposing to exempt otherwise

prohibited management interlocks where the dual service would not

result in a monopoly or substantial lessening of competition and would

not otherwise threaten safety and soundness. The process for obtaining

such exemptions will be set out in an NCUA directive to credit unions.

Since 1979, when regulations implementing the Interlocks Act were

first promulgated, NCUA has recognized that interlocks involving

certain classes of depository organizations present a reduced risk to

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

such organizations, competition could be enhanced. Thus, in the initial

interlocks rules published in 1979, NCUA reserved the authority to

permit interlocks to strengthen newly-chartered organizations, troubled

organizations, organizations in low- or moderate-income areas and

organizations controlled or managed by minorities or women. The

authority to permit interlocks in such circumstances was deemed

``necessary for the promotion of competition over the long term.'' See

44 FR 42161, 42165 (July 19, 1979). Prior to the CDRI Act, these

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

Management Consignment exemption under the CDRI Act was generally

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

limited basis.

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

under the Interlocks Act, NCUA again has authority to grant exemptions

that will not adversely affect competition. NCUA believes that

interlocks involving the four classes of organizations previously

identified may provide management expertise needed to enhance the

ability of the organizations to compete. Accordingly, NCUA proposes to

establish a rebuttable presumption that an interlock would not result

in a monopoly or substantial lessening of competition, if: (1) the

depository organization is located in, and primarily serves, low- or

moderate-income areas; (2) the depository organization is controlled or

managed by members of a minority group or women; (3) the depository

institution is newly-chartered; or (4) the depository institution, or

in the case of a depository organization, a depository institution

under its control, is deemed to be in ``troubled condition'' under

regulations implementing Sec. 914 of the Financial Institutions Reform,

Recovery, and Enforcement Act of 1989 (FIRREA) (12 U.S.C. 1831i).

A claim that factors exist giving rise to a presumption does not

preclude NCUA from denying a request for an exemption if NCUA finds,

based on available materials, that the presumption is rebutted. That

is, an exemption request may be denied if NCUA determines that the

interlock would result in a monopoly or substantial lessening of

competition. The presumptions are designed to provide greater

flexibility to classes of organizations that may have greater need for

seasoned management, but the presumptions are rebuttable because NCUA

recognizes that such needs can only be met in a manner that is

consistent with the statute.

The definitions of ``area median income'' and ``low- and moderate-

income areas'' added to the regulations in 1996 to implement the CDRI

Act amendments are being retained to provide guidance as to when an

organization would qualify for one of the presumptions. Interlocks that

are based on the presence of a rebuttable presumption would be allowed

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

order. Nothing in the proposed rule would prevent an organization from

applying for an extension of an interlock exemption granted under a

presumption if the factors continued to apply. The organizations would

also be free to utilize any other exemption that may be available.

NCUA proposes that any other interlock approved under this section

be allowed to continue unless it becomes anticompetitive, unsafe or

unsound, or is subject to a condition requiring termination at a

specific time.

E. Small Market Share Exemption

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

rulemaking seeking comment on a proposed market share exemption. The

proposed exemption would have been available for interlocks involving

institutions that, on a combined basis, would control less than 20% of

the deposits in a community or relevant MSA. These agencies published

small market share exemption proposals pursuant to the broad exemptive

authority vested in the agencies prior to the CDRI Act. Because the

CDRI Act restricted the agencies' broad rulemaking authority, the OCC,

FDIC, and FRB withdrew their proposals.\4\ The broad exemptive

authority under the EGRPR Act again authorizes the small market share

exemption. Accordingly, NCUA joins the Agencies in renewing the

proposal for the small market share exemption.

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\4\ See OCC, 59 FR 29740 (June 9, 1994), FDIC, 59 FR 18764

(April 20, 1994), and FRB, 59 FR 7909 (February 17, 1994) for

proposals prior to CDRI Act. Following enactment of the CDRI Act

these proposals were withdrawn; 60 FR 67424 (December 29, 1995) for

withdrawal by OCC and FRB; and 60 FR 7139 (February 7, 1995) for

withdrawal by the FDIC.

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The Interlocks Act, by discouraging common management among

financial institutions, seeks to prevent unaffiliated institutions from

having an adverse impact on competition in the products and services

they offer. Where depository institutions dominate a large portion of

the market, these risks are significant. When a particular market is

served by many institutions, however, the risks diminish that

depository institutions with interlocking relationships can adversely

affect the available products and services available in their markets.

NCUA believes that the combination of the shares and deposits of

two institutions provides a meaningful assessment of the capacity of

the two institutions to control credit and related

[[Page 57948]]

services in their market. Accordingly, NCUA proposes to exempt

interlocking service involving two unaffiliated depository

organizations that together control no more than 20% of the shares and

deposits in any RMSA or community, as appropriate. Organizations

claiming the exemption would be required to determine the market share

in each RMSA and community in which both depository organizations (or

affiliates) are located.

Determination of the relevant market in which to apply the 20%

market share standards would be made in accordance with the rules for

determining the relevant market under other provisions of NCUA's

interlocks regulations. The rules are structured to apply the community

prohibition to interlocks between organizations operating within a

community and to apply the RMSA prohibition to interlocks between

organizations operating within a RMSA. The small market share exemption

would not be available for interlocks subject to the major assets

prohibition.

The exemptions would continue to apply as long as the organizations

meet the applicable conditions. Any event that causes the level of

deposits controlled to exceed 20% of deposits in any RMSA or community,

such as expansion or a merger, would be considered to be a change in

circumstances. Accordingly, the depository organizations would have 15

months, under NCUA's regulation, to address the prohibited interlock by

termination or otherwise. The Agency with jurisdiction over the

organization may establish a shorter period. Conforming changes

relating to termination have been made to NCUA's change of

circumstances provisions.

NCUA believes that the small market share exemption may be

considered pro-competitive. The exemption is intended to enlarge the

pool of management talent upon which depository institutions may draw,

resulting in more competitive, better-managed institutions without

causing significant anticompetitive effects.

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

proposed small market share exemption. Management is responsible for

compliance with the terms of the exemption and for maintaining

sufficient supporting documentation. To determine their eligibility for

the exemptions, depository organizations would need to obtain

appropriate share and deposit data from NCUA and appropriate deposit

data from the FDIC. This information is available upon request to the

agencies or on the Internet at http://www.ncua.gov or http://

www.fdic.gov.

In order to understand the following discussion, it is important to

understand that credit unions offer both share accounts and deposit

accounts. Federal credit unions may only establish and maintain share

accounts for members, except for public unit accounts and certain

nonmember deposits at low-income designated credit unions. Some state-

chartered credit unions may establish and maintain both share accounts

and deposit accounts. Differences between share and deposit accounts

are discussed in NCUA's Truth in Savings rules, 12 CFR part 707, app.

C, comments 707.2(i)1-5 and 707.2(p)1-3. These differences are

important in obtaining pertinent information to document the small

market share exemption.

As NCUA does not report total credit union shares or deposits held

in federally insured credit unions by RMSA or community, affected

depository institutions must create their own custom reports from

information on the NCUA Website. Credit union share and deposit

information is available under the heading ``Credit Union Data'' on

NCUA's first Website page. Entry into the ``Credit Union Data'' icon

will lead the user into the ``Custom Reports'' icon. Entry into the

``Custom Reports'' icon will allow the user to collect total share

information by city or state by adding the ``total shares-total'' and

``total shares and deposits-total'' of all credit unions listed at that

locale. ``Total shares-total'' will capture the share accounts of

federal credit unions and federally insured, state-chartered credit

unions only accepting share accounts. ``Total shares and deposits-

total'' will capture the share and deposit accounts of federally

insured, state-chartered credit unions accepting both share accounts

and deposit accounts. Since NCUA does not provide share and deposit

totals by community, RMSA, or branch, each credit union will need to

provide a reasonable, good faith estimate as to total credit union

shares and deposits in a community, RMSA, or branch. The credit union

totals will need to be added to information about bank and thrift

deposits obtained from the FDIC, and the percentages calculated and

maintained in the credit union's records to act as proof documenting

the use of the small market share exemption.

The most recently available share and deposit data will be used to

determine whether organizations are entitled to the exemptions. All

credit unions file call report information semi-annually. Credit unions

over $50 million in assets report and file call report information

quarterly. FDIC publishes its deposit total information annually. A

credit union seeking the exception is entitled to rely upon the share

and deposit data that has been compiled for the previous year, until

more recent data has been distributed.

NCUA requests comments on all aspects of the proposed small market

share exemption. In particular, NCUA requests comments regarding the

following issues:

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

appropriate limit for the application of the exemptions.

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

the Report of Condition and Income and NCUA in connection with the

Financial and Statistical Report, NCUA 5300, for federal credit unions,

and the Call Report, NCUA 5300S, for federally insured, state chartered

credit unions should be used to determine eligibility for the

exemptions, and whether alternative sources of information concerning

deposit share should be acceptable for determining availability of the

exemptions.

3. Whether calculation of a depository organization's eligibility

for exemption from the community prohibition will create undue burdens,

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

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

4. Whether there is a significant risk that depository

organizations would create ``hub and spoke'' interlocks to evade the

Interlocks Act, whereby several directors of one depository

organization serve as directors of different unaffiliated depository

organizations.

Paperwork Reduction Act

NCUA invites comment on:

(1) Whether the proposed collection of information contained in

this notice of proposed rulemaking is necessary for the proper

performance of NCUA's functions, including whether the information has

practical utility;

(2) The accuracy of NCUA's estimate of the burden of the proposed

information collection;

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

information to be collected;

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

respondents, including through the use of automated collection

techniques or other forms of information technology; and

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

minutes, and purchase of services to provide information.

The collection of information requirements contained in this notice

of proposed rulemaking have been submitted to the Office of Management

and Budget for review in accordance with the Paperwork Reduction Act of

1995 (44 U.S.C. 3507(d)). Organizations and individuals desiring to

submit comments on the information collection requirements should

direct them to the Office of Information and Regulatory Affairs, OMB,

Room 10235, New Executive Office Building, Washington, DC 20503;

Attention: Alex Hunt, Desk Officer for NCUA. Comments must also be sent

to NCUA, 1775 Duke Street, Alexandria, VA 22314-3428; Attention: James

L. Baylen, Paperwork Reduction Act Coordinator, Telephone No. (703)

518-6410; Fax No. (703) 518-6433; E-Mail Address: [email protected] All

comments submitted in response to these proposed regulations will be

available for public inspection, during and after the comment period,

at NCUA's Central Office, 6th Floor, Law Library, 1775 Duke Street,

Alexandria, VA between the hours of 9 a.m. and 1 p.m., Monday through

Friday of each week except federal holidays, and by appointment through

the Law Librarian at (703) 518-6540.

The collection of information requirements in this proposed rule

are found in 12 CFR 711.4(h)(1)(i), 711.5(a)(1), 711.5(a)(2), 711.5(b),

711.6(a), and 711.6(c). This information is required to evidence

compliance with the requirements of the Interlocks Act by federal

credit unions and federally insured, state-chartered credit unions. The

likely respondents are federal credit unions and federally insured,

state-chartered credit unions.

In the past several years, NCUA has received approximately one

management interlock application each year. The following estimates are

provided:

Estimated average annual burden hours per respondent: 3 hours.

Estimated number of respondents: 1.

Start-up costs to respondents: None.

NCUA 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.

Regulatory Flexibility Act

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

(5 U.S.C. 605(b)), NCUA hereby certifies that this proposed rule will

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

entities. NCUA expects that this proposal will not: (1) have

significant secondary or incidental effects on a substantial number of

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

These conclusions are based on the fact that the proposed regulations

relax the criteria for obtaining an exemption from the interlocks

prohibitions, and specifically address the needs of small entities by

creating the small market share exemption. Accordingly, a regulatory

flexibility analysis is not required.

Executive Order 12866

The NCUA Board has determined that this proposal is not a

significant regulatory action under Executive Order 12866.

Executive Order 12612

Executive Order 12612 requires NCUA to consider the effect of its

actions on state interests. The proposed rule would, as does the

current rule, apply to all federally insured credit unions, including

federally insured state-chartered credit unions. However, since the

proposed rule reduces regulatory burdens, NCUA has determined that the

proposed rule does not constitute a ``significant regulatory action''

for purposes of the Executive Order. NCUA welcomes comment on means and

methods to coordinate with the state credit union supervisors regarding

achievement of shared goals involving viability, flexibility, parity,

conformity, and safety and soundness regarding management interlocks.

List of Subjects in 12 CFR Part 711

Antitrust, Credit unions, Holding companies, Management official

interlocks.

By the National Credit Union Administration Board on October 22,

1998.

Becky Baker,

Secretary of the Board.

For the reasons set out in the preamble, the NCUA proposes to amend

part 711 of chapter VII of title 12 of the Code of Federal Regulations

to read as follows:

PART 711--MANAGEMENT OFFICIAL INTERLOCKS

1. The authority citation for part 711 continues to read as

follows:

Authority: 12 U.S.C. 3201-3208.

Sec. 711.2 [Amended]

1. Section 711.2 is amended by removing paragraphs (b) and (f) and

redesignating paragraphs (c) through (s) as paragraphs (b) through (q),

respectively.

2. Section 711.3 is amended by revising paragraph (c) to read as

follows:

Sec. 711.3 Prohibitions.

* * * * *

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

organization with total assets exceeding $2.5 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 $1.5

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

two depository organizations. The NCUA will adjust these thresholds, as

necessary, based on year-to-year change in the average of the Consumer

Price Index for the Urban Wage Earners and Clerical Workers, not

seasonally adjusted, with rounding to the nearest $100 million. The

NCUA will announce the revised thresholds by publishing a notice in the

Federal Register.

3. Section 711.5 is revised to read as follows:

Sec. 711.5 Small market share exemption.

(a) Exemption. A management interlock that is prohibited by

Sec. 711.3(a) or Sec. 711.3(b) is permissible, provided:

(1) The interlock is not prohibited by Sec. 711.3(c); and

(2) The depository organizations (and their depository institution

affiliates) hold, in the aggregate, no more than 20% of the deposits,

in each RMSA or community in which the depository organizations (or

their depository institution affiliates) are located. The amount of

shares or deposits will be determined by reference to the most recent

annual Summary of Deposits published by the FDIC or in information

provided by NCUA for the RMSA or community. This information is

available on the Internet at http://www.ncua.gov or http://

www.fdic.gov.

(b) Confirmation and records. Each depository organization must

maintain records sufficient to support its determination of eligibility

for the exemption under paragraph (a) of this section, and must

reconfirm that determination on an annual basis.

4. Section 711.6 is revised to read as follows:

Sec. 711.6 General exemption.

(a) Exemption. NCUA may, by agency order issued following receipt

of an application, exempt an interlock from

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the prohibitions in Sec. 711.3, if NCUA finds that the interlock would

not result in a monopoly or substantial lessening of competition, and

would not present other safety and soundness concerns.

(b) Presumptions. In reviewing applications for an exemption under

this section, NCUA will apply a rebuttable presumption that an

interlock will not result in a monopoly or substantial lessening of

competition if the depository organization seeking to add a management

official:

(1) Primarily serves, low-and moderate-income areas;

(2) Is controlled or managed by persons who are members of a

minority group or women;

(3) Is a depository institution that has been chartered for less

than two years; or

(4) Is deemed to be in ``troubled condition'' as defined in

Sec. 701.14(b)(3) of this chapter.

(c) Duration. Unless a shorter expiration period is provided in the

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

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

substantial lessening of competition, or be unsafe or unsound. If the

NCUA grants an interlock exemption in reliance upon a presumption under

paragraph (b) of this section, the interlock may continue for three

years, unless otherwise provided in the approval.

5. Section 711.7 is amended by revising paragraph (a) to read as

follows:

Sec. 711.7 Change in circumstances.

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

service if a change in circumstances causes the service to become

prohibited. 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 increase in the aggregate deposits of the depository organization,

or an acquisition, merger, consolidation, or reorganization of the

ownership structure of a depository organization that causes a

previously permissible interlock to become prohibited.

* * * * *

[FR Doc. 98-28879 Filed 10-28-98; 8:45 am]

BILLING CODE 7535-01-U