Management Official Interlocks

NATIONAL CREDIT UNION ADMINISTRATION

12 CFR PART 711

Management Official Interlocks

AGENCY: National Credit Union Administration.

ACTION: Final rule.

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SUMMARY: The National Credit Union Administration (NCUA) revises its

rule regarding management interlocks. The final rule conforms to recent

statutory changes, modernizes and clarifies the rule, and reduces

unnecessary regulatory burdens where feasible, consistent with

statutory requirements. The final rule 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 (OTS),

(collectively ``the banking agencies'').

EFFECTIVE DATE: This rule is effective January 1, 2000.

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

Division of Operations, Office of General Counsel, at the National

Credit Union Administration, 1775 Duke Street, Alexandria, Virginia,

22314, 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\ Section 2210(a)

of the EGRPR Act amended the Interlocks Act by changing the thresholds

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

EGRPR Act, management officials of depository organizations with total

assets exceeding $1 billion were prohibited from serving as management

officials of unaffiliated depository organizations with assets

exceeding $500 million, regardless of the location 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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\1\ The OCC, the Board, the FDIC, and the OTS, (collectively,

the Agencies) recently published final rules similar to NCUA to

implement the EGRPR Act. 51673 (September 24, 1999).

\2\ The Agencies, and NCUA, 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), 348.2(q), 711.2(r), and

563f.(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,

[[Page 66357]]

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 the CDRI Act, effective October 1, 1996. See

61 FR 50702, September 27, 1996. The banking 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. The Proposal

On October 29, 1998, NCUA published a notice of proposed rulemaking

(the proposal) to implement these statutory changes. 63 FR 57945,

October 29, 1998. The proposal also renewed 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.

III. The Final Rule and Comments Received

NCUA received four comments, all in favor of the proposal. Several

commenters emphasized the importance of coordination among NCUA and the

banking agencies. Most of the proposed changes received either no

comments or uniformly favorable comments. Accordingly, NCUA has adopted

the proposal with only one minor change. The following discussion

summarizes the amendments to NCUA's management interlocks rule and the

comments received.

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 can be removed. NCUA received no comments on the

proposed elimination of these terms and therefore adopts this provision

as proposed.

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.

NCUA proposed to amend the regulations to reflect the new threshold

amounts, and to add a mechanism providing for periodic adjustments of

the thresholds. The adjustment would be based on changes in the

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

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

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

along with the banking agencies, will announce the change by a final

rule without notice or opportunity for comment published in the Federal

Register. For those years in which changes in the Consumer Price Index

would not change the thresholds by more than $100 million, NCUA and the

banking agencies will not adjust the threshold. NCUA, however, wishes

to clarify that if the threshold is not adjusted to reflect a Consumer

Price Index change in any given year, the change for that year will be

considered in computing adjustments to the threshold in subsequent

years. NCUA also invited comment on the types of market changes that

may warrant subsequent adjustments to the major assets prohibition.

One commenter expressed support for the proposal to periodically

adjust the thresholds based on the Consumer Price Index, but admonished

NCUA to coordinate any changes with the banking agencies to ensure that

all supervisory agencies are using a consistent standard. NCUA agrees

that such coordination among it and the banking agencies will ensure

consistency in the standard. NCUA intends to coordinate with the

banking agencies on such adjustments, just as it has coordinated these

changes to the rule. Accordingly, NCUA adopts the mechanism providing

for periodic adjustments of the thresholds set forth in the proposal

without any changes.

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

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

Interlocks Act and substituted a general authority for the Agencies to

create exemptions by regulation. Accordingly, the proposal recommended

removal of these regulatory exemptions. NCUA received no comment on

this provision. NCUA finds the removal of the exemptions appropriate in

light of their statutory repeal and therefore adopt this provision as

set forth in the proposal without any changes.

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 proposed 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

[[Page 66358]]

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 proposed 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 also proposed 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.

One commenter supported the general exemption and stated that the

presumptions in the proposal were suitable, but cautioned that any

request for an interlock extension beyond three years should be closely

scrutinized. NCUA recognizes that the permitted interlocks are

exceptions to the rule and will assess the need for such service on a

case-by-case basis. NCUA is adopting the proposed section with no

changes.

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 banking 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 products and services available in their markets.

NCUA's proposal stated that the combination of the shares and

deposits of two institutions would provide a meaningful assessment of

the capacity of the two institutions to control credit and related

services in their market. Accordingly, NCUA proposed 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. Under the proposal, to determine their

eligibility for the exemption, depository organizations would need to

obtain appropriate share and deposit data from NCUA and appropriate

deposit data from the FDIC.

NCUA received two comments in support of the small market share

exemption, one emphasizing that the rule must conform to that of the

other banking agencies and another emphasizing the importance that

deposits in all insured financial institutions, banks, thrifts and

credit unions, be included in the calculation. The banking agencies

proposed that depository organizations rely only on bank and thrift

data collected by the FDIC in its Summary of Deposits to determine

eligibility for the small market share exemption. NCUA proposed that

the bank and thrift data from the Summary of Deposits be combined with

credit union data from NCUA to calculate total assets in a given market

and market share. Both the Summary of Deposits, and the NCUA data are

readily accessible on the Internet and each permits the user to search

for deposit and asset data by city, state and zip code. However, the

FDIC database reports deposit and asset information by an institution's

branch location, while NCUA's database does not. NCUA does not collect

information from credit unions on a branch by branch basis; rather it

attributes all share, deposit and asset information to a credit union's

main branch. If credit union data were included in the calculation of

total assets in a community, the figure may be inaccurate. For example,

in a community where the main branch of a

[[Page 66359]]

large credit union is located, the credit union assets would

artificially inflate the market calculations. At the same time, the

calculations in a nearby community where the large credit union has a

branch location would be artificially low.

The banking agencies believe that the deposit data maintained in

the FDIC's Summary of Deposits provides a reliable approximation of the

market for a given location. NCUA agrees. To the extent that credit

unions hold a significant amount of the total deposits in a given

market, this information may be used to demonstrate that an interlock

will not result in a monopoly or substantial lessening of competition

under the general exemption. This approach is consistent with the

banking agencies' treatment of credit union shares in the merger

context, where the banking agencies consider credit union shares as one

of many mitigating factors if a merger transaction exceeds a specified

threshold. Accordingly, for the sake of consistency and to permit all

depository organizations to use a more accurate method of calculating

market share, in the final rule, NCUA has eliminated the requirement

that credit union shares be included in the calculation of market

share, and instead permits the reliance on the Summary of Deposits data

only. Organizations claiming the exemption must determine the market

share in each RMSA and community in which both depository organizations

(or their depository institution affiliates) have offices. The relevant

market used for the small market share exception (that is, the RMSAs or

communities in which both depository organizations or their depository

institution affiliates have offices) are the same markets described in

the community and RMSA prohibitions. The small market share exemption

is not available for interlocks subject to the major assets

prohibition.

The small market share exemption 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. The small market share exemption is

not available for interlocks subject to the major assets prohibition.

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.

The most recently available deposit data will be used to determine

whether organizations are entitled to the exemptions. FDIC publishes

its deposit total information annually. A credit union seeking the

exception is entitled to rely upon the deposit data that has been

compiled for the previous year, until more recent data has been

distributed.

F. General Comments

One commenter expressed concern that even though a management

official interlock between two credit union is exempt under the

Interlocks Act, credit unions should be made aware that a conflict may

arise when a management official serves two credit unions. NCUA

recognizes that dual service to two or more credit unions could pose a

conflict and reminds credit unions that they may choose to adopt a

policy addressing the issue.

G. Effective Date of the Final Rule

The banking agencies set the effective date of their joint final

rule on January 1, 2000, in accordance with 12 U.S.C. 4802(b). Although

NCUA is not subject to 12 U.S.C. 4802(b), in order to simplify

compliance with the rule, NCUA has adopted the same effective date.

Compliance with the final rule is not mandatory until the effective

date. Section 4802(b), however, also permits any person subject to the

regulation to comply with the regulation voluntarily, prior to the

effective date. To the extent that a credit union and bank desire to

comply voluntarily with the final rule, they may elect to do so

immediately. If a depository institution elects to comply voluntarily

with any section of the management interlocks rule, it must comply with

the entire part.

Paperwork Reduction Act

NCUA may not conduct or sponsor, and an organization is not

required to respond to, an information collection unless it displays a

currently valid OMB control number. The OMB control number is 3133-

0152. NCUA sought comment on the burden estimates for the information

collections listed below and received no comments that specifically

addressed the burden stemming from these information collections. The

collections of information contained in this final rule have been

reviewed and approved by the Office of Management and Budget under

control number 3604-0118 in accordance with the Paperwork Reduction Act

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

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

Reduction Project (3604-0118), Washington, D.C. 20503, with copies of

such comments to be sent to NCUA, 1775 Duke Street, Alexandria, VA

22314, Attention: James L. Baylen, Paperwork Reduction Act Coordinator,

Telephone No. (703) 518-6410; Fax No. (703) 518-6433; E-Mail address:

[email protected]

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.

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 rule will not have a

significant economic impact on a substantial number of small entities.

NCUA expects 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. These conclusions are

based on the fact that the 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.

[[Page 66360]]

Executive Order 12612

Executive Order 12612 requires NCUA to consider the effect of its

actions on state interests. The final rule, just as the current rule,

applies to all federally insured credit unions, including federally

insured state-chartered credit unions. However, since the rule reduces

regulatory burdens, NCUA has determined that it does not constitute a

``significant regulatory action'' for purposes of the Executive Order.

Small Business Regulatory Enforcement Fairness Act

The Office of Management and Budget is reviewing this rule to

determine that it is not major for purposes of the Small Business

Regulatory Enforcement Fairness Act of 1996.

List of Subjects in 12 CFR Part 711

Antitrust, Credit unions, Holding companies, Management official

interlocks.

By the National Credit Union Administration Board on November

18, 1999.

Becky Baker,

Secretary of the Board.

For the reasons set out in the preamble, the NCUA amends 12 CFR

part 711 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

deposits will be determined by reference to the most recent annual

Summary of Deposits published by the FDIC. This information is

available on the Internet at 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 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. 99-30692 Filed 11-24-99; 8:45 am]

BILLING CODE 7535-01-P