§ 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.).

(b) Purpose and scope. The general purpose of the Interlocks Act and this part is to foster competition by prohibiting a management official of a depository institution or depository holding company from also serving as a management official of another depository institution or depository holding company if the two organizations (1) are not affiliated and (2) are very large or are located in the same local area. This part applies to management officials of insured nonmember banks and their affiliates.

§ 348.2 Definitions.

For the purpose of this part, the following definitions apply:

(a) "Adjacent cities, towns, or villages" means cities, towns, or villages

whose borders are within ten road miles of each other at their closest points. The property line of an office located in an unincorporated city, town, or village is regarded as the boundary line of that city, town, or village for the purpose of this definition.

(b) "Affiliate" has the meaning given in section 202 of the Interlocks Act. For purposes of section 202, an individual's shares include shares of members of his or her immediate family. For the purpose of section 202(3)(B) of the Interlocks Act, an affiliate relationship based on common ownership does not exist if the appropriate Federal supervisory agency or agencies determine, after giving the affected persons the opportunity to re-i spond, that the asserted affiliation appears to have been established in 2 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 agencies will consider 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 with that person's ownership of shares of the other organization. “Immediate family” includes spouse, mother, father, child, grandchild, sister, brother or any of their spouses, whether or not any of their shares are held in trust.

(c) "Community" means city, town, or village or contiguous or adjacent cities, towns, or villages.

(d) "Contiguous cities, towns, or villages" means cities, towns, or villages whose borders actually touch each other.

(e) "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) having its principal office located in the United States.

(f) "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,

(g) "Depository organization” means a depository institution or a depository holding company.

(h)(1) "Management official" means (ii) an employee or officer with management functions (including a branch manager); (ii) a director (including an advisory director or honorary director); (iii) a trustee of a business organization under the control of trustees (e.q., a mutual savings bank); or (iv) any person who has a representative or nominee serving in any such capacity. (2) "Management official" does not include (i) a person whose management function 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) persons described in the provisions of section 202(4) of the Interlocks Act (12 U.S.C. 3201(4)).

(i) "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.

(j) "Person" means natural persons, corporations, or other business enti

ties.

(k) "Representative or nominee" means a person who serves as a management official and has an express or implied obligation to act on behalf of another person with respect to management responsibilities. Whether a person is a "representative or nominee" depends upon the facts in individual cases. The appropriate Federal supervisory agency or agencies will determine, after giving the affected persons the opportunity to respond whether a person is a "representative or nominee". Certain relationships (including family, employment, and agency relationships), or the ability

and exercise of ability by a shareholder of a depository organization to elect a director, may be evidence of such an express or implied obligation. For the purposes of this subsection, person shall include only natural persons.

(1) "Total assets" means assets measured on a consolidated basis as of the close of the organization's last fiscal year. The total assets of a depository holding company include the total assets of all of its subsidiary affiliates, except that "total assets" of a diversified savings and loan holding company, as defined in section 408(a)(1)(F) of the National Housing Act (12 U.S.C. 1730a(a)(1)(F)), or 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)), means only the total assets of its depository institution affiliate. "Total assets" of a United States branch or agency of a foreign commercial bank means total assets of such branch or agency itself exclusive of the assets of the other offices of the foreign commercial bank.

(2) Offices of depository institution affiliates of both are located in the same community; or

(3) One is a depository institution that has an office in the same community as a depository institution affiliate of the other.

(b) Relevant Metropolitan Statistical Area. A management official of a depository organization may not serve at the same time as a management official of another depository organization not affiliated with it if:

(1) Both are depository institutions, each has an office in the same relevant metropolitan statistical area, and either institution has total assets of $20 million or more;

(2) Offices of depository institution affiliates of both are located in the same relevant metropolitan statistical area and either of the depository institution affiliates has total assets of $20 million or more; or

(3) One is a depository institution that has an office in the same relevant metropolitan statistical area as a depository institution affiliate of the other and either the depository institution or the depository institution affiliate has total assets of $20 million or more.

(c) Major Assets. Without regard to location, a management official of a depository organization with total assets exceeding $1 billion or a management official of any affiliate of the greater than $1 billion depository organization may not serve at the same time as a management official of a nonaffiliated depository organization with total assets exceeding $500 million or a management official of any affiliate of the greater than $500 million depository organization.

[45 FR 24394, Apr. 9, 1980, as amended at 48 FR 50305, Nov. 1, 1983; 49 FR 28043, July 10, 1984]

§ 348.4 Permitted interlocking relationships.

(a) Interlocking relationship with exempt organization. The prohibitions of § 348.3 do not apply in the case of any one or more of the following organizations or their subsidiaries:

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

States except as an incident to its activities outside the United States;

(2) A corporation operating under section 25 or 25(a) of the Federal Reserve Act ("Edge Corporations" and "Agreement Corporations");

(3) A depository organization that has been placed formally in liquidation, or that is in the hands of a receiver, conservator, or other official exercising a similar function;

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

(5) A state-chartered savings and loan guaranty corporation; or

(6) A Federal Home Loan bank or any other bank organized solely for the purpose of serving depository institutions (commonly referred to as "banker's banks") or solely for the purpose of providing securities clearing services and services related thereto for depository institutions, securities companies, or both.

(b) Interlocking relationships permitted by agency order. A management official or a prospective management official of an insured nonmember bank or any affiliate thereof may enter into an otherwise prohibited interlocking relationship with a depository organization that falls within one of the classifications enumerated in paragraph (b) of this section if the Federal supervisory agency (as specified in section 207 of the Interlocks Act) of the organization that falls within one of the classifications determines that the relationship meets the requirements set forth in this paragraph. If the depository organization that falls within one of the classifications set out below is not subject to the interlocks regulations of any of the Federal supervisory agencies, then the FDIC shall determine whether the relationship meets the requirements of this paragraph.

(1) Organization in low-income area; minority or women's organization. A person may serve at the same time as a management official of two or more depository organizations (or affiliates thereof) if one of the depository organizations is (i) located, or to be located, in a low-income or other economically depressed area, or (ii) controlled or managed by persons who

are members of minority groups or by women, subject to the following conditions: (A) The relationship is necessary to provide management or operating expertise to the organization specified in paragraph (b)(1)(i) or (b)(1)(ii) of this section; (B) no interlocking relationship permitted by this paragraph shall continue for more than five years; and (C) other conditions in addition to or in lieu of the foregoing may be imposed by the appropriate Federal supervisory agency in any specific case.

(2) Newly-chartered organization. A person may serve at the same time as a management official of two or more depository organizations if one of the depository organizations (or affiliates thereof) is a newly-chartered organization, subject to the following conditions: (i) The relationship is necessary to provide management or operating expertise to the newly-created organization; (ii) no interlocking relationship permitted by this paragraph shall continue for more than 2 years after the newly-chartered organization commences business; and (iii) other conditions in addition to or in lieu of the foregoing may be imposed by the appropriate Federal supervisory agency in any specific case.

(3) Conditions endangering safety or soundness. A person may serve at the same time as a management official of two or more depository organizations (or affiliates thereof) if one of the depository organizations faces conditions endangering the organization's safety or soundness, subject to the following conditions: (i) The relationship is necessary to provide management or operating expertise to such organization facing conditions endangering safety or soundness; and (ii) other conditions in addition to or in lieu of the foregoing may be imposed by the appropriate Federal supervisory agency in any specific case.

(4) Organization sponsoring credit union. A mamagement official of a depository organization or its affiliate may serve at the same time as a management official of a Federally-insured credit union that is sponsored by the depository organization or its affiliate primarily to serve employees of the organization.

(5) Loss of management officials due to change in circumstance. If a depository organization is likely to lose 30 percent or more of its directors or of its total management officials due to a change in circumstances described in § 348.6 of this part, the affected management officials may continue to serve in excess of the time periods specified in § 348.6, Provided That: (i) The depository organization's prospective loss of management officials or directors will be disruptive to the internal management of the depository organization; (ii) the depository organization demonstrates that, absent a grant of relief in accordance with this paragraph, 30 percent or more of either its directors or management officials are likely to sever their interlocking relationships with the depository organization; (iii) if the prospective losses of management officials resulted from more than one change in circumstances, such changes in circumstances must have occurred within a 15-month period; and (iv) the depository organization develops a plan for the orderly termination of service by each such management official over a period not longer than 30 months after the change in circumstances which caused the person's service to become prohibited (but if the loss of management officials is the result of more than one change in circumstances, the 30-month period is measured from the first change in circumstances). Other conditions in addition to or in lieu of the foregoing may be imposed by the Federal supervisory agency. In evaluating requests made pursuant to this paragraph, the Federal supervisory agency will presume that a director who also is a paid, fulltime employee of the depository organization, absent unusual circumstances, will not resign from the position of director with that depository organization. This presumption may, however, be rebutted by a showing that such unusual circumstances exist.

(c) Diversified savings and loan holding company. Notwithstanding § 348.3, a person who serves as a management official of a depository organization and of a nondepository organization (or any subsidiary thereof) is not prohibited from continuing the

interlocking service when the nondepository organization becomes a diversified savings and loan holding company as that term is defined in section 408(a)(1)(F) of the National Housing Act (12 U.S.C. 1730a(a)(1)(F)), and may continue to serve until November 10, 1988, despite the occurrence of any changes in circumstances, whether or not those changes in circumstances occurred prior to November 30, 1983.

[45 FR 24394, Apr. 9. 1980, as amended at 48 FR 50305, Nov. 1, 1983]

§ 348.5 Grandfathered interlocking relationships.

A person whose interlocking service in a position as a management official of two or more depository organizations began prior to November 10, 1978, and was not immediately prior to that date in violation of section 8 of the Clayton Act (15 U.S.C. 19) is not prohibited from continuing to serve in such interlocking positions until November 10, 1988. Any management official who has been required to terminate or who has terminated service in one or more such interlocking positions as a result of a merger, acquisition, consolidation or establishment of offices that was formerly defined as a change in circumstances in 12 CFR 348.6(a) (1981) is not prohibited from continuing or resuming such service until November 10, 1988.

[48 FR 5534, Feb. 7, 1983]

§ 348.6 Changes in circumstances.

(a) Non-grandfathered interlocks. If a person's service as a management official is not grandfathered under § 348.5 of this part, this person's service must be terminated if a change in circumstances causes such service to become prohibited. Such a change may include, but is not limited to, an increase in asset size of an organization due to natural growth, a change in relevant metropolitan statistical area or community boundaries or the designation of a new relevant metropolitan statistical area, an acquisition, merger, or consolidation, the establishment of an office, or a disaffiliation.

(b) Grace period. If a person's nongrandfathered service as a management official becomes prohibited

The FDIC administers and enforces the Interlocks Act with respect to insured nonmember banks and their affiliates and may refer the case of a prohibited interlocking relationship involving any such organization, regardless of the nature of any other organization involved in the prohibited relationship, to the Attorney General 2 of the United States to enforce compliance with the Interlocks Act and this part. If an affiliate of an insured nonmember bank is primarily subject to the regulation of another Federal depository supervisory agency, then the FDIC does not administer and enforce the Interlocks Act with respect to that affiliate.

349.3 Reports by executive officers and principal shareholders.

349.4 Disclosure of indebtedness of execu

tive officers and principal shareholders.

AUTHORITY: Sec. 2 (9 "Seventh" and "Tenth"), Pub. L. No. 797, 64 State. 881, as amended by sec. 309, Pub. L. No. 95-630, 92 Stat. 3677 (12 U.S.C. 1819 "Seventh" and "Tenth"); secs. 428(b) and 429, Pub. L. No. 97-320, 96 Stat. 1526, 1527.

SOURCE: 48 FR 57114, Dec. 28, 1983.

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