Thresholds Increase for the Major Assets Prohibition of the Depository Institution Management Interlocks Act Rules, 54465-54472 [2019-21840]
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54465
Rules and Regulations
Federal Register
Vol. 84, No. 197
Thursday, October 10, 2019
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10 CFR Part 72
[NRC–2019–0126]
RIN 3150–AK35
List of Approved Spent Fuel Storage
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100 Storage System, Certificate of
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3
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the direct final rule that was published
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SUPPLEMENTARY INFORMATION: On August
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such as the forced helium dehydration;
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[FR Doc. 2019–22148 Filed 10–9–19; 8:45 am]
BILLING CODE 7590–01–P
DEPARTMENT OF THE TREASURY
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Currency
12 CFR Part 26
[Docket ID OCC–2018–0011]
RIN 1557–AE22
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[Docket No. R–1641]
RIN 7100–AF31
FEDERAL DEPOSIT INSURANCE
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12 CFR Part 348
RIN 3064–AE57
Thresholds Increase for the Major
Assets Prohibition of the Depository
Institution Management Interlocks Act
Rules
Office of the Comptroller of the
Currency (OCC); Board of Governors of
the Federal Reserve System (Board); and
Federal Deposit Insurance Corporation
(FDIC).
ACTION: Final rule.
AGENCY:
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Federal Register / Vol. 84, No. 197 / Thursday, October 10, 2019 / Rules and Regulations
The OCC, the Board, and the
FDIC (collectively, the agencies) are
issuing a final rule that increases the
thresholds in the major assets
prohibition for management interlocks
for purposes of the Depository
Institution Management Interlocks Act
(DIMIA). The DIMIA major assets
prohibition prohibits a management
official of a depository organization
with total assets exceeding $2.5 billion
(or any affiliate of such an organization)
from serving at the same time as a
management official of an unaffiliated
depository organization with total assets
exceeding $1.5 billion (or any affiliate of
such an organization). DIMIA provides
that the agencies may adjust, by
regulation, the major assets prohibition
thresholds in order to allow for inflation
or market changes. The final rule
increases both major assets prohibition
thresholds to $10 billion to account for
changes in the United States banking
market since the current thresholds
were established in 1996.
DATES: The final rule is effective on
October 10, 2019.
FOR FURTHER INFORMATION CONTACT:
OCC: Daniel Perez, Senior Attorney,
Christopher Rafferty, Attorney, Chief
Counsel’s Office, (202) 649–5490; or for
persons who are deaf or hearingimpaired, TTY, (202) 649–5597; Office
of the Comptroller of the Currency, 400
7th Street SW, Washington, DC 20219.
Board: Claudia Von Pervieux, Senior
Counsel, (202) 452–2552; or Andrew
Hartlage, Counsel, (202) 452–6483, of
the Legal Division; Katie Cox, Manager,
(202) 452–2721; or Melissa Clark, Lead
Financial Institution Policy Analyst,
(202) 452–2277, of the Division of
Supervision and Regulation, Board of
Governors of the Federal Reserve
System, 20th Street and Constitution
Avenue NW, Washington, DC 20551.
For the hearing impaired only,
Telecommunication Device for the Deaf,
(202) 263–4869, Board of Governors of
the Federal Reserve System, 20th Street
and Constitution Avenue NW,
Washington, DC 20551.
FDIC: Karen Jones Currie, Senior
Examination Specialist, Division of Risk
Management Supervision, (202) 898–
3981; Mark Mellon, Counsel, Legal
Division, (202) 898–3884; Federal
Deposit Insurance Corporation, 550 17th
Street NW, Washington, DC 20429.
SUPPLEMENTARY INFORMATION:
SUMMARY:
Table of Contents
I. Introduction
A. Summary of Final Rule and Policy
Objectives
B. Background
II. Proposed Rule and Comments Received
III. Description of Final Rule
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IV. Regulatory Analysis
A. Administrative Procedure Act and
Effective Date
B. Riegle Community Development and
Regulatory Improvement Act
C. Paperwork Reduction Act of 1995
D. Regulatory Flexibility Act
E. OCC Unfunded Mandates Reform Act of
1995 Determination
F. Plain Language
G. The Congressional Review Act
I. Introduction
A. Summary of Final Rule and Policy
Objectives
The Office of the Comptroller of the
Currency (OCC), the Board of Governors
of the Federal Reserve System (Board),
and the Federal Deposit Insurance
Corporation (FDIC) (collectively, the
agencies) are issuing a final rule that
increases the major assets prohibition
thresholds for management interlocks
for purposes of the Depository
Institution Management Interlocks Act
(DIMIA).1 The increase in the thresholds
accounts for changes in the United
States banking market since Congress
established the current thresholds in
1996. Prior to this final rule, a
management official 2 of a depository
organization 3 (or any affiliate of such
organization) with total assets exceeding
$2.5 billion could not serve as a
management official of an unaffiliated
depository organization (or any affiliate
of such organization) with total assets
exceeding $1.5 billion without seeking
1 12
U.S.C. 3201 et seq.
agencies’ rules define ‘‘management
official’’ to include directors; advisory or honorary
directors of a depository institution with total assets
of $100 million or more; ‘‘senior executive officers,’’
as that term is defined in the agencies’ rules
regarding notice of addition or change of directors
and senior executive officers; branch managers;
trustees of depository organizations under the
control of trustees; and any persons who have a
‘‘representative or nominee’’ (as the agencies’ rules
define that term) serving in any of the capacities
described above. 12 CFR 26.2(j)(1) (OCC); 12 CFR
212.2(j)(1) and 238.92(j)(1) (Board); and 12 CFR
348.2(k)(1) (FDIC).
3 The agencies’ rules define ‘‘depository
organization’’ to mean a depository institution or a
depository holding company. The agencies’ rules
define ‘‘depository institution’’ to mean 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, the
agencies’ rules define ‘‘depository institution’’ also
to mean a United States office of a foreign
commercial bank, including a branch or agency.
The agencies’ rules define ‘‘depository holding
company’’ to mean 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. 12 CFR 26.2 (OCC); 12 CFR 212.2
and 238.92 (Board); and 12 CFR 348.2 (FDIC).
2 The
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an exemption. The final rule increases
both thresholds to $10 billion.
By increasing the major assets
prohibition thresholds, the final rule
reduces the number of depository
organizations subject to the major assets
prohibition. This will reduce burden by
relieving depository organizations
below the increased thresholds from
having to ask the agencies for
exemptions from the major assets
prohibition. The agencies anticipate that
raising the asset thresholds will assist
small depository organizations in
finding qualified directors by
eliminating the need to file requests for
exemptions from the major assets
prohibition.
B. Background
DIMIA—implemented in the agencies’
respective rules at 12 CFR parts 26, 212,
238 subpart J, and 348—fosters
competition by prohibiting a
management official from serving at the
same time as a management official of
an unaffiliated depository organization
in situations where the management
interlock may have an anticompetitive
effect.4 DIMIA achieves this purpose
through three statutory prohibitions,
which are implemented in the agencies’
rules.
The first prohibition, the community
prohibition, precludes a management
official of a depository organization
from serving at the same time as a
management official of an unaffiliated
depository organization if the
depository organizations in question (or
any depository institution affiliate
thereof) have offices in the same
community.5 The second prohibition,
the relevant metropolitan statistical area
(RMSA) prohibition, precludes a
management official of a depository
organization from serving at the same
time as a management official of an
unaffiliated depository organization if
the depository organizations in question
(or any depository institution affiliate
thereof) have offices in the same
RMSA 6 and each depository
organization has total assets of $50
million or more. The third prohibition,
the major assets prohibition, precludes
4 12 CFR 26.1(b) (OCC); 12 CFR 212.1(b) and
238.91(b) (Board); and 12 CFR 348.1(b) (FDIC).
5 The agencies’ rules define ‘‘community’’ to
mean a city, town, or village, and contiguous and
adjacent cities, towns, or villages. 12 CFR 26.2(c)
(OCC); 12 CFR 212.2(c) and 238.92(c) (Board); and
12 CFR 348.2(c) (FDIC).
6 The agencies’ rules define ‘‘RMSA’’ to mean 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. 12 CFR
26.2(m) (OCC); 12 CFR 212.2(m) and 238.92(m)
(Board); and 12 CFR 348.2(c) (FDIC).
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Federal Register / Vol. 84, No. 197 / Thursday, October 10, 2019 / Rules and Regulations
a management official of a depository
organization with total assets exceeding
$2.5 billion (or any affiliate of such an
organization) from serving at the same
time as a management official of an
unaffiliated depository organization
with total assets exceeding $1.5 billion
(or any affiliate of such an organization),
regardless of the location of the two
depository organizations. While the first
two prohibitions capture the risk of
anticompetitive effects from
management interlocks between
depository organizations that operate
within overlapping geographical areas,
the major assets prohibition addresses
management interlocks between
depository organizations that are large
enough that a management interlock
may present anticompetitive concerns
despite the fact that the involved
organizations may not have offices in
the same community or RMSA.
DIMIA allows the agencies to
prescribe regulations that permit
otherwise prohibited interlocks under
certain circumstances.7 Pursuant to the
implementing regulations, the
appropriate agency may exempt a
prohibited interlock in response to an
application by a depository organization
if the appropriate agency finds that the
interlock would not result in a
monopoly or substantial lessening of
competition and would not present
safety and soundness concerns.8
The $1.5 billion and $2.5 billion
thresholds in the major assets
prohibition were enacted through
amendments to DIMIA in the Economic
Growth and Regulatory Paperwork
Reduction Act of 1996 (EGRPRA).9
During hearings on EGRPRA, it was
noted that the increase of the asset
thresholds to $1.5 billion and $2.5
billion was made because the previous
asset threshold numbers did not
‘‘realistically reflect the size of large
institutions in today’s market.’’ 10
7 12
U.S.C. 3207.
CFR 26.6(a) (OCC); 12 CFR 212.6(a) and
238.96(a) (Board); and 12 CFR 348.6(a) (FDIC). The
agencies have published an interagency
interpretation that explains which agency is the
appropriate agency for purposes of filing a request
for a general exemption under the agencies’ rules.
See Permissible Interlocks—Regulatory Exceptions;
Agency Approval, 1 Fed. Res. Reg. Serv. (Bd. of
Governors of the Fed. Reserve Sys.) § 3–831 (Nov.
18, 1992), 2006 WL 3928616.
9 See Economic Growth and Regulatory
Paperwork Reduction Act of 1996, Public Law 104–
208, Title II, 110 Stat. 3009–9, § 2210(a).
10 The Economic Growth and Regulatory
Paperwork Reduction Act—S. 650: Hearings Before
the Subcomm. on Fin. Insts. & Regulatory Relief of
the S. Comm. on Banking, Hous., & Urban Affairs,
104 Cong. 90 (1995) (statement of Eugene A.
Ludwig, Comptroller of the Currency). Initially, the
thresholds were set at $500,000,000 and
$1,000,000,000. See Financial Institutions
Regulatory and Interest Rate Control Act of 1978,
8 12
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DIMIA, as amended, also provides
that the agencies may adjust the
thresholds as necessary ‘‘to allow for
inflation or market changes.’’ 11
Unadjusted since 1996, the major assets
prohibition thresholds set forth in
EGRPRA do not reflect the growth and
consolidation among U.S. depository
organizations that has occurred in the
intervening years and do not
realistically reflect the size of large
institutions today. For instance, based
on regulatory reporting, total assets at
depository organizations have grown by
more than 250 percent between the
fourth quarter of 1996 and the fourth
quarter of 2018. Moreover, in a March
2017 report to Congress mandated by
EGRPRA, the agencies stated that they
intended to reduce regulatory burden by
adjusting the major assets thresholds in
the agencies’ DIMIA regulations.12
II. Proposed Rule and Comments
Received
On January 31, 2019, the agencies
published for comment a notice of
proposed rulemaking (proposed rule or
proposal) to amend the agencies’ DIMIA
regulations.13 The proposed rule would
have increased the major assets
prohibition thresholds from $1.5 billion
and $2.5 billion to $10 billion each.
Alternatively, the proposed rule
requested comment on three
calibrations that would have increased
the major assets prohibition thresholds
based on market changes or inflation
that had occurred during the period
following the establishment of the
thresholds. The proposed rule also
described the procedures the agencies
would use to increase the thresholds to
reflect inflation in the future.
In response to the proposed rule, the
agencies received six comment letters,14
five of which were responsive. Four of
the five comment letters expressed
support for increasing the major assets
prohibition thresholds, while the fifth
comment letter, without expressing an
opinion about the thresholds, suggested
that the agencies use clear language and
consider ‘‘the most recent developments
for measuring market change.’’ Two of
the five comment letters also included
Public Law 95–630, Title II, Depository Institutions
Management Interlocks Act, 92 Stat. 3641, 3672
(Nov. 10, 1978).
11 12 U.S.C. 3203.
12 Federal Financial Institutions Examination
Council, Joint Report to Congress: Economic
Growth and Regulatory Paperwork Reduction Act,
82 FR 15900, 15903 (Mar. 30, 2017), https://
www.ffiec.gov/pdf/2017_FFIEC_EGRPRA_JointReport_to_Congress.pdf.
13 84 FR 604 (Jan. 31, 2019).
14 Three comment letters were submitted by
industry groups, and three comment letters were
submitted by individuals.
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54467
a suggestion that was outside the scope
of the proposal—namely, that the
agencies expand the number of
exemptions from the definition of
‘‘management official.’’
Comments Regarding the Major Assets
Prohibition Thresholds
Two commenters specifically
expressed support for the agencies’
proposal to increase the major assets
prohibition thresholds to $10 billion.
One commenter noted that increasing
the thresholds in such a manner would
help community banks find qualified
management officials, especially in rural
areas. The second commenter supported
the $10 billion thresholds but suggested
that the agencies tie further, periodic
threshold adjustments to an asset
growth index, rather than to inflation.15
The commenter suggested that such
periodic adjustments could be made
through a direct final rule without
notice and comment.
Two commenters generally supported
increasing the thresholds but provided
alternatives to the proposal. One
commenter suggested that the agencies
adjust the thresholds based on a
depository organization’s share of total
industry assets, centered on the growth
of average assets per bank from 1996 to
2018. The second commenter suggested
that the agencies adjust the thresholds
based on asset growth and stated that
Congress intended for DIMIA to have
two separate thresholds, rather than a
single, consistent threshold in order to
make it more difficult for a larger
depository organization to control a
smaller depository organization. Both
commenters suggested that their
proposed alternative methods for
adjusting the thresholds would better
reflect the anticompetitive concerns
embodied in DIMIA.
As explained in more detail in the
following section, the agencies believe
that the proposed $10 billion asset
thresholds appropriately capture the
anticompetitive risk that the major
assets prohibition is intended to address
by prohibiting interlocks between larger
depository organizations while
exempting smaller or communitybanking-organization-sized depository
organizations. A $10 billion asset
threshold is consistent with thresholds
that Congress and the agencies have
used to distinguish between small
institutions and larger institutions.
Further, establishing identical asset
15 Specifically, the commenter recommended that
the agencies adjust the thresholds based on the
annual percentage change in commercial bank
assets reflected in the Federal Reserve’s ‘‘H.8 Assets
and Liabilities of Commercial Banks in the United
States.’’
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threshold levels will enable depository
organizations to ascertain more easily
whether they may be subject to the
major assets prohibition. DIMIA does
not require the agencies to set the
thresholds at two different levels, nor do
the agencies believe that setting the
thresholds at different levels would
better serve the purpose of DIMIA’s
major assets prohibition. In
consideration of these factors, the
agencies believe increasing both asset
thresholds to $10 billion is appropriate.
With regard to the suggestion that the
agencies tie future threshold
adjustments to an asset growth index,
the agencies believe that changes to the
methodology for future, periodic
adjustments are outside the scope of this
rulemaking, which requested comment
on a one-time adjustment to the asset
thresholds to account for market
changes. The agencies have existing
authority under DIMIA and the
agencies’ DIMIA regulations to make
periodic, discretionary adjustments to
the thresholds to account for inflation
through direct final rules without notice
and comment.16 In the proposal, the
agencies stated that, following
adjustment of the thresholds by the
proposed rule and consistent with
existing authority, the agencies would
make further adjustments to the
thresholds to account for inflation by
publishing a direct final rule without
notice and comment.17 The agencies
noted that if further adjustments to the
thresholds are warranted for reasons
other than inflation, the agencies would
propose another adjustment through a
subsequent notice of proposed
rulemaking and seek public comment
on the proposal.18 As a reference for
future, periodic adjustments, the
agencies believe that making future
adjustments based on the inflation
measure in the agencies’ rules would be
less volatile than making future
adjustments based on asset growth and
would be more appropriate for a
recurring process.
Comments Discussing Other Aspects of
DIMIA
Two commenters suggested that the
agencies expand the current list of
exemptions from the definition of
‘‘management official’’ contained in the
16
17 ‘‘The [agencies] will adjust these thresholds, as
necessary, based on the year-to-year change in the
average of the Consumer Price Index for the Urban
Wage Earners and Clerical Workers, not seasonally
adjusted, with rounding to the nearest $100 million.
The [agencies] will announce the revised thresholds
by publishing a final rule without notice and
comment in the Federal Register.’’ 12 CFR 26.3(c),
212.3(c), 238.93(c), and 348.3(c).
18 See 84 FR 604 at 607 (Jan. 31, 2019).
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agencies’ rules. One of the commenters
suggested that the agencies revise the
definition to exempt management
officials at non-depository affiliates and
management officials of foreign
affiliates. Another commenter suggested
that the agencies exempt depository
organizations’ foreign affiliates that do
not engage in business or activities in
the United States.
The proposed rule did not
contemplate changes to the definition of
‘‘management official,’’ and the agencies
are not adopting the commenters’
suggestions at this time; however, the
agencies will consider incorporating
these suggestions in a future revision to
the agencies’ rules.
III. Description of Final Rule
After considering the comments
received, the agencies are adopting
without change the proposal to increase
the major assets prohibition thresholds
from $1.5 billion and $2.5 billion to $10
billion each. As finalized, the major
assets prohibition will prohibit
management interlocks between
unaffiliated depository organizations
with total assets exceeding $10 billion
(or any affiliates of such organizations).
The final rule’s increase to the major
assets prohibition thresholds, and the
application of the major assets
prohibition to larger depository
organizations rather than small
depository organizations (i.e.,
community banking organizations), is
consistent with the purpose of the major
assets prohibition of DIMIA.19 A major
assets prohibition with a $10 billion
asset threshold will prohibit interlocks
between larger depository organizations,
which could present a risk of
anticompetitive conduct at the level of
the U.S. banking market, while
exempting smaller or communitybanking-organization-sized depository
organizations, which generally operate
in regional markets and do not present
the same competitive risks to the
broader U.S. banking market.20
In addition, the final rule is consistent
with the current thresholds that
Congress and the agencies have used to
distinguish between small institutions
and larger institutions. For example,
sections 201 and 203 of the Economic
Growth, Regulatory Relief, and
Consumer Protection Act of 2018
19 Legislative history indicates that Congress
intended for the major assets prohibition to apply
to ‘‘larger’’ organizations. See H.R. Rep. No. 95–
1383, at 5 (1978); S. Rep. No. 95–323, at 13 (1977).
20 While depository organizations with $10
billion or less in total assets will not be covered by
the major assets prohibition against management
interlocks, those depository organizations are still
subject to the community and RMSA prohibitions.
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provide certain burden relief for
institutions with less than $10 billion in
total consolidated assets.21
Additionally, the Dodd-Frank Wall
Street Reform and Consumer Protection
Act uses a $10 billion threshold to
distinguish between large banks subject
to supervision by the Consumer
Financial Protection Bureau and small
banks subject to prudential regulator
supervision.22 A $10 billion threshold
also is consistent with the asset
threshold used by the Board to
distinguish between community
banking organizations and larger
banking organizations for supervisory
and regulatory purposes,23 the asset
threshold used by the FDIC to
distinguish between ‘‘small’’ and
‘‘large’’ institutions for purposes of its
deposit insurance assessment
regulations,24 and the asset threshold
used by the OCC to distinguish
community banks from midsize and
large banks for supervisory purposes.25
Further, having a single, consistent asset
threshold will simplify the agencies’
DIMIA regulations and enable
depository organizations to identify
more easily whether they may be subject
to the major assets prohibition.
The final rule increases the number of
depository organizations that would no
longer be subject to the major assets
prohibition and therefore reduces the
number of institutions that need to seek
an exemption from the major assets
prohibition from the appropriate
agency.
As of December 31, 2018, 981
depository organizations had total assets
of more than $1.5 billion and were
21 Economic Growth, Regulatory Relief, and
Consumer Protection Act of 2018, Public Law 115–
174, § 201, 203, 132 Stat. 1296, 1306, 1309 (2018)
(enacting a ‘‘Community Bank Leverage Ratio’’
capital simplification framework that is generally
available to depository institutions and depository
institution holding companies with $10 billion or
less in total consolidated assets and exempting
generally from the prohibitions of section 13 of the
Bank Holding Company Act of 1956, also known as
the ‘‘Volcker Rule,’’ certain entities with $10 billion
or less in total consolidated assets).
22 Public Law 111–203, § 1025 & 1026, 124 Stat.
1376, 1990–95 (2010).
23 Bd. of Governors of the Fed. Reserve Sys.,
Commercial Bank Examination Manual (rev. Jan.
2018), https://www.federalreserve.gov/publications/
files/cbem.pdf.
24 See 12 CFR 327.8(e) and (f). For the purposes
of the FDIC’s assessment regulations, a ‘‘small
institution’’ generally is an insured depository
institution with less than $10 billion in total assets.
Generally, a ‘‘large institution’’ is an insured
depository institution with $10 billion or more in
total assets or that is treated as a large institution
for assessment purposes under section 327.16(f).
25 Comptroller’s Handbook, ‘‘OCC Community
Bank Supervision’’ (June 2018), https://
www.occ.gov/publications/publications-by-type/
comptrollers-handbook/community-banksupervision/pub-ch-community-banksupervision.pdf.
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subject to the major assets prohibition.26
In addition, 751 depository
organizations with total assets of more
than the $2.5 billion threshold were
subject to restrictions on management
interlocks with unaffiliated depository
organizations with total assets
exceeding the $1.5 billion threshold.
Raising the $1.5 billion asset threshold
to $10 billion would exempt 672
depository organizations from the major
assets prohibition as of December 31,
2018. As of December 31, 2018, 309
depository organizations reported total
assets greater than $10 billion and
would remain subject to the major assets
prohibition.
IV. Regulatory Analysis
A. Administrative Procedure Act and
Effective Date
The agencies are issuing the final rule
without the 30-day delayed effective
date ordinarily prescribed by the
Administrative Procedure Act (APA).27
Pursuant to section 553(d) of the APA,
the required publication of a substantive
rule shall be made not less than 30 days
before its effective date, except for,
among other things, ‘‘a substantive rule
which grants or recognizes an
exemption or relieves a restriction.’’ 28
The final rule increases the asset
thresholds for the major assets
prohibition, which will increase the
number of depository organizations that
are no longer subject to the prohibition
and therefore reduce the number of
depository organizations that will need
to seek an exemption from the
prohibition. The effect of the final rule
will be to relieve certain depository
organizations from the restrictions of the
DIMIA major assets prohibition.
Accordingly, the agencies are issuing
the final rule with an immediate
effective date.
B. Riegle Community Development and
Regulatory Improvement Act
Section 302(a) of the Riegle
Community Development and
Regulatory Improvement Act of 1994
(CDRI) requires that each Federal
26 The analysis in this preamble reflecting
changes in the number of depository organizations
exempted does not incorporate credit unions
because this final rule does not apply to credit
unions. Data used in this analysis were drawn from
the December 31, 1996, and December 31, 2018,
Consolidated Reports of Condition and Income (Call
Reports), Consolidated Financial Statements for
Holding Companies, Parent Company Only
Financial Statements for Large Holding Companies,
Parent Company Only Financial Statements for
Small Holding Companies, and Reports of Assets
and Liabilities of U.S. Branches and Agencies of
Foreign Banks.
27 5 U.S.C. 553.
28 5 U.S.C. 553(d)(1).
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banking agency, in determining the
effective date and administrative
compliance requirements for new
regulations that impose additional
reporting, disclosure, or other
requirements on depository institutions,
consider, consistent with principles of
safety and soundness and the public
interest, any administrative burdens that
such regulations would place on
depository institutions, including small
depository institutions, and customers
of depository institutions, as well as the
benefits of such regulations. Section
302(b) requires that new regulations and
amendments to regulations that impose
additional reporting, disclosures, or
other new requirements on depository
institutions generally shall take effect on
the first day of a calendar quarter that
begins on or after the date on which the
regulations are published in final form,
subject to certain exceptions that are not
relevant here.
The final rule does not impose
additional reporting, disclosure, or other
requirements on depository institutions,
including small depository institutions
or customers of depository institutions;
therefore, section 302 of CDRI does not
apply. The agencies note, however, that
in determining the effective date and
administrative compliance requirements
for this final rule, they considered the
administrative burdens and benefits of
the rule, including that the rule reduces
burden on the depository organizations
to which it applies.
C. Paperwork Reduction Act of 1995
Certain provisions of the final rule
contain a ‘‘collection of information’’
within the meaning of the Paperwork
Reduction Act of 1995 (PRA) (44 U.S.C.
3501–3521). In accordance with the
requirements of the PRA, the agencies
may not conduct or sponsor, and the
respondent is not required to respond
to, an information collection unless it
displays a currently valid Office of
Management and Budget (OMB) control
number. The OMB control number for
the OCC is 1557–0014; and the FDIC’s
is 3064–0118. These information
collections will be extended for three
years, with revision. Although the Board
has previously included these
collections of information under OMB
control number 7100–0134, the
collections of information are not
currently cleared under the PRA.
Therefore, the Board is implementing a
new collection of information in
connection with this final rule. The
agencies did not receive any specific
comments on the PRA. The information
collection requirements contained in the
proposed rulemaking were submitted by
the OCC and FDIC to OMB under
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54469
section 3507(d) of the PRA (44 U.S.C.
3507(d)) and section 1320.11 of the
OMB’s implementing regulations (5 CFR
part 1320). OMB filed a comment in
response to the submissions, instructing
the OCC and FDIC to resubmit at the
final rule stage and discuss the reason
for any increase in burden. The OCC
and FDIC have resubmitted the
information collection requirements to
OMB in connection with the final rule.
The Board reviewed the final rule under
the authority delegated to the Board by
OMB. The FDIC’s and OCC’s burden
increased slightly through an effort to
conform its burden estimates to those of
the other agencies. In addition, the
agencies have increased their estimates
for the burden associated with
recordkeeping from the initial proposal
to reflect the fact that the number of
respondents that may engage in
recordkeeping would not be decreased
by the final rule. Additionally, the
agencies have removed from their
burden table estimates references to 12
CFR 26.6(b) (OCC); 12 CFR 212.6(b) and
238.96(b) (Board); and 12 CFR 248.6(b)
(FDIC), as those sections do not contain
an information collection. This change
has not impacted the estimated burden
calculation.
PRA Burden Estimates
OCC
OMB control number: 1557–0014.
Estimated number of respondents: 2.
Estimated average hours per response:
Reporting Sections 26.4(h)(1)(i)–4.
Recordkeeping Section 26.5(b)–3.
Estimated annual burden hours: 14.
Board
OMB control number: 7100–NEW
(The current management official
interlocks reporting and recordkeeping
requirements are housed under OMB
control number 7100–0134 and will be
separated out in a new OMB control
number).
Estimated number of respondents: 4
for reporting requirements and 8 for
recordkeeping requirements.
Estimated average hours per response:
Reporting Sections 212.4(h)(1)(i) and
238.94(h)(1)(i)–4.
Recordkeeping Section 212.5(b) and
238.95(b)–3.
Estimated annual burden hours: 40.
FDIC
OMB control number: 3064–0118.
Estimated number of respondents: 6.
Estimated average hours per response:
Reporting Sections 348.4(h)(1)(i)–4.
Recordkeeping Section 348.5(b)–3.
Estimated annual burden hours: 42.
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D. Regulatory Flexibility Act
The Regulatory Flexibility Act 29
(RFA) requires an agency either to
provide a final regulatory flexibility
analysis with a final rule for which
general notice of proposed rulemaking
is required or to certify that the
proposed rule will not have a significant
economic impact on a substantial
number of small entities. The U.S. Small
Business Administration (SBA)
establishes size standards that define
which entities are small businesses for
purposes of the RFA.30 Under
regulations issued by the SBA, the size
standard to be considered a small
business for banking entities subject to
the proposed rule is $600 million or less
in consolidated assets.31 Under 5 U.S.C.
605(b), this analysis is not required if an
agency certifies that the rule will not
have a significant economic impact on
a substantial number of small entities
and publishes its certification and a
brief explanatory statement in the
Federal Register along with its rule.
OCC: The OCC currently supervises
approximately 782 small entities.32
Currently, the major assets prohibition
of DIMIA prevents a management
official of a depository organization
with total assets exceeding $2.5 billion
(depository organization threshold) or
any affiliate of such organization from
serving as a management official of an
unaffiliated depository organization
with total assets exceeding $1.5 billion
(unaffiliated organization threshold).
This final rule will increase both
thresholds to $10 billion in assets,
which will only impact banking
organizations with total consolidated
assets between the current thresholds of
$1.5 billion and $2.5 billion and the
new threshold of $10 billion. No OCCregulated small entities are impacted by
these changes. Additionally, the
changes in this final rule do not impose
any new reporting, recordkeeping, or
29 5
U.S.C. 601 et seq.
SBA, Table of Small Business Size
Standards Matched to North American Industry
Classification System Codes, available at https://
www.sba.gov/sites/default/files/files/Size_
Standards_Table.pdf.
31 See 13 CFR 121.201.
32 The OCC bases its estimate of the number of
small entities on the SBA’s size thresholds for
commercial banks and savings institutions, and
trust companies, which are $600 million and $41.5
million, respectively. Consistent with the General
Principles of Affiliation, 13 CFR 121.103(a), the
OCC counts the assets of affiliated financial
institutions when determining if it should classify
an OCC-supervised institution as a small entity. The
OCC uses December 31, 2018, to determine size
because a ‘‘financial institution’s assets are
determined by averaging the assets reported on its
four quarterly financial statements for the preceding
year.’’ See footnote 8 of the U.S. Small Business
Administration’s Table of Size Standards.
30 U.S.
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other compliance requirements. For
these reasons, the OCC certifies that the
final rule will not have a significant
economic impact on a substantial
number of small entities.
Board: In accordance with section
603(a) of the RFA,33 the Board
published an Initial Regulatory
Flexibility Analysis (IFRA) with the
proposal.34 The Board solicited
comment on the effect of the proposal
on small entities. The Board did not
receive any comment on the IFRA.
The RFA requires an agency to
prepare a final regulatory flexibility
analysis (FRFA) unless the agency
certifies that the rule will not, if
promulgated, have a significant impact
on a substantial number of small
entities. The FRFA must contain: (1) A
statement of the need for, and objectives
of, the rule; (2) a statement of the
significant issues raised by the public
comments in response to the IRFA, a
statement of the agency’s assessment of
such issues, and a statement of any
changes made in the proposed rule as a
result of such comments; (3) the
response of the agency to any comments
filed by the Chief Counsel for Advocacy
of the SBA in response to the proposed
rule, and a detailed statement of any
changes made to the proposed rule in
the final rule as a result of the
comments; (4) a description of and an
estimate of the number of small entities
to which the rule will apply or an
explanation of why no such estimate is
available; (5) a description of the
projected reporting, recordkeeping, and
other compliance requirements of the
rule, including an estimate of the classes
of small entities that will be subject to
the requirement and the type of
professional skills necessary for
preparation of the report or record; (6)
a description of the steps the agency has
taken to minimize the significant
economic impact on small entities,
including a statement for selecting or
rejecting the other significant
alternatives to the rule considered by
the agency.
1. Statement of the need for, and
objectives of, the final rule.
As discussed in the Supplementary
Information, the final rule increases the
major assets prohibition thresholds for
management interlocks in the Board’s
rules implementing DIMIA. Under the
current major assets prohibition, a
management official of a depository
organization with total assets exceeding
$2.5 billion (or any affiliate of such an
organization) is prohibited from serving
at the same time as a management
33 5
U.S.C. 603.
FR 604 (Jan. 31, 2019).
34 84
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Fmt 4700
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official of an unaffiliated depository
organization with total assets exceeding
$1.5 billion (or any affiliate of such an
organization), regardless of the location
of the two depository organizations. For
these purposes, the term ‘‘depository
organization’’ means a depository
institution or a depository holding
company. ‘‘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. ‘‘Depository
holding company’’ means a bank
holding company or a savings and loan
holding company (as more fully defined
in section 202 of DIMIA) having its
principal office located in the United
States.35 As discussed above, the
Board’s objective in issuing this rule is
to reduce the number of depository
organizations subject to the major assets
prohibition. The Board has authority
under DIMIA to prescribe regulations
necessary to carry out DIMIA with
respect to state banks that are members
of the Federal Reserve System, bank
holding companies, and savings and
loan holding companies.36
2. A discussion of the significant
issues raised by public comments in
response to the IRFA, and the Board’s
response to any comments filed by the
Chief Counsel for Advocacy of the SBA
in response to the proposed rule.
The Board did not receive any
comments on the IRFA that it published
in connection with the proposal. In
addition, the Chief Counsel for
Advocacy of the SBA did not file any
comments in response to the proposal.
Accordingly, no changes were made to
the proposal as a result of RFA-related
comments.
3. Description and estimate of the
number of entities to which the rule will
apply.
The rule applies to state member
banks, bank holding companies, and
savings and loan holding companies
having their principal offices in the
United States. Under regulations issued
by the SBA, a small entity includes a
state member bank, bank holding
company, or savings and loan holding
company with total assets of $600
million or less and trust companies with
35 12
36 12
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CFR 212.2 and 231.92.
U.S.C. 3207(2).
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total assets of $41.5 million or less.37 On
average since the second quarter of
2018, there were approximately 2,976
small bank holding companies, 133
small savings and loan holding
companies, and 70 small state member
banks. The rule increases the total asset
level at which depository organizations
and their affiliates become subject to the
major assets prohibition from $1.5
billion and $2.5 billion to $10 billion
and $10 billion, respectively.
4. Description of the projected
reporting, recordkeeping, and other
compliance requirements of the rule.
The changes to the major assets
prohibition do not impose any new
reporting, recordkeeping, and other
compliance requirements.
5. Description of the steps take to
minimize any significant economic
impact on small entities.
Based on its analysis and for the
reasons stated above, the Board believes
that this final rule will not have a
significant economic impact on a
substantial number of small entities.
FDIC: The Regulatory Flexibility Act
(RFA) generally requires that, in
connection with a final rule, an agency
prepare and make available for public
comment a final regulatory flexibility
analysis describing the impact of the
rulemaking on small entities.38 A
regulatory flexibility analysis is not
required, however, if the agency
certifies that the rule will not have a
significant economic impact on a
substantial number of small entities.
The Small Business Administration
(SBA) has defined ‘‘small entities’’ to
include banking organizations with total
assets less than or equal to $600
million.39 Generally, the FDIC considers
a significant effect to be a quantified
effect in excess of 5 percent of total
annual salaries and benefits per
institution, or 2.5 percent of total noninterest expenses. The FDIC believes
that effects in excess of these thresholds
typically represent significant effects for
FDIC-supervised institutions. The FDIC
supervises 3,489 depository
37 See
13 CFR 121.201.
U.S.C. 601 et seq.
39 The SBA defines a small banking organization
as having $600 million or less in assets, where an
organization’s ‘‘assets are determined by averaging
the assets reported on its four quarterly financial
statements for the preceding year.’’ See 13 CFR
121.201 (as amended by 84 FR 34261, effective
August 19, 2019). In its determination, the ‘‘SBA
counts the receipts, employees, or other measure of
size of the concern whose size is at issue and all
of its domestic and foreign affiliates.’’ See 13 CFR
121.103. Following these regulations, the FDIC uses
a covered entity’s affiliated and acquired assets,
averaged over the preceding four quarters, to
determine whether the covered entity is ‘‘small’’ for
the purposes of RFA.
38 5
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institutions,40 of which 2,741 are
defined as small banking entities by the
terms of the RFA.41
The final rule only affects institutions
with total consolidated assets between
the current thresholds of $1.5 billion
and $2.5 billion and the new threshold
of $10 billion. Therefore, the final rule
will likely affect zero small entities.
Accordingly, the FDIC believes that
the final rule will not have a significant
impact on a substantial number of small
entities. For the reasons described above
and pursuant to 5 U.S.C. 605(b), the
FDIC certifies that the final rule will not
have a significant economic impact on
a substantial number of small entities.
E. OCC Unfunded Mandates Reform Act
of 1995 Determination
The OCC analyzed the final rule
under the factors set forth in the
Unfunded Mandates Reform Act of 1995
(UMRA) (2 U.S.C. 1532). Under this
analysis, the OCC considered whether
the proposed rule includes a Federal
mandate that may result in the
expenditure by State, local, and Tribal
governments, in the aggregate, or by the
private sector, of $100 million or more
in any one year (adjusted for inflation).
The final rule will relieve burden and
will not impose any new mandates.
Therefore, the OCC concludes that the
proposed rule will not result in an
expenditure of $100 million or more
annually by state, local, and tribal
governments or by the private sector.
F. Plain Language
Section 722 of the Gramm-LeachBliley Act requires the Federal banking
agencies to use plain language in all
proposed and final rules published after
January 1, 2000. The agencies received
one comment that generally suggested
that the agencies use clear language in
this final rule. The agencies believe the
final rule is presented in a simple and
straightforward manner. Accordingly,
the agencies are issuing the final rule
without change.
G. The Congressional Review Act
Pursuant to the Congressional Review
Act, the Office of Management and
Budget’s Office of Information and
Regulatory Affairs designated this rule
as not a ‘‘major rule,’’ as defined at 5
U.S.C. 804(2).
40 FDIC-supervised institutions are set forth in 12
U.S.C. 1813(q)(2).
41 Call Report, December 31, 2018.
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54471
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 238
Administrative practice and
procedure, Banks, banking, Holding
companies, Reporting and
recordkeeping requirements, Securities.
12 CFR Part 348
Antitrust, Banks, banking, Holding
companies.
Authority and Issuance
For the reasons stated in the
preamble, the OCC amends 12 CFR part
26, the Board amends 12 CFR parts 212
and 238, and the FDIC amends 12 CFR
part 348 as follows:
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the
Currency
PART 26—MANAGEMENT OFFICIAL
INTERLOCKS
1. The authority citation for part 26
continues to read as follows:
■
Authority: 12 U.S.C. 1, 93a, 1462a, 1463,
1464, 3201–3208, 5412(b)(2)(B).
2. Section 26.3 is amended by revising
the first sentence of paragraph (c) to
read as follows:
■
§ 26.3
Prohibitions.
*
*
*
*
*
(c) Major assets. A management
official of a depository organization
with total assets exceeding $10 billion
(or any affiliate of such an organization)
may not serve at the same time as a
management official of an unaffiliated
depository organization with total assets
exceeding $10 billion (or any affiliate of
such an organization), regardless of the
location of the two depository
organizations. * * *
Federal Reserve System
PART 212—MANAGEMENT OFFICIAL
INTERLOCKS (REGULATION L)
3. The authority citation for part 212
continues to read as follows:
■
Authority: 12 U.S.C. 3201–3208; 15 U.S.C.
19.
4. Section 212.3 is amended by
revising the first sentence of paragraph
(c) to read as follows:
■
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54472
§ 212.3
Federal Register / Vol. 84, No. 197 / Thursday, October 10, 2019 / Rules and Regulations
Prohibitions.
*
*
*
*
*
(c) Major assets. A management
official of a depository organization
with total assets exceeding $10 billion
(or any affiliate of such an organization)
may not serve at the same time as a
management official of an unaffiliated
depository organization with total assets
exceeding $10 billion (or any affiliate of
such an organization), regardless of the
location of the two depository
organizations. * * *
Dated: October 1, 2019.
Joseph M. Otting,
Comptroller of the Currency.
By order of the Board of Governors of the
Federal Reserve System, September 27, 2019.
Ann E. Misback,
Secretary of the Board.
Federal Deposit Insurance Corporation.
By order of the Board of Directors.
Dated at Washington, DC, on August 20,
2019.
Valerie J. Best,
Assistant Executive Secretary.
PART 238—SAVINGS AND LOAN
HOLDING COMPANIES (REGULATION
LL)
[FR Doc. 2019–21840 Filed 10–9–19; 8:45 am]
5. The authority citation for part 238
is revised to read as follows:
DEPARTMENT OF THE TREASURY
■
Authority: 5 U.S.C. 552, 559; 12 U.S.C.
1462, 1462a, 1463, 1464, 1467, 1467a, 1468,
1813, 1817, 1829e, 1831i, 1972, 3201–3208;
15 U.S.C. 78l.
6. Section 238.93 is amended by
revising the first sentence of paragraph
(c) to read as follows:
■
§ 238.93
Office of the Comptroller of the
Currency
12 CFR Part 46
[Docket ID OCC–2018–0035]
RIN 1557–AE55
Prohibitions.
*
*
*
*
*
(c) Major assets. A management
official of a depository organization
with total assets exceeding $10 billion
(or any affiliate of such an organization)
may not serve at the same time as a
management official of an unaffiliated
depository organization with total assets
exceeding $10 billion (or any affiliate of
such an organization), regardless of the
location of the two depository
organizations. * * *
Federal Deposit Insurance Corporation
PART 348—MANAGEMENT OFFICIAL
INTERLOCKS
7. The authority citation for part 348
continues to read as follows:
■
Authority: 12 U.S.C. 3207, 12 U.S.C.
1823(k).
8. Section 348.3 is amended by
revising the first sentence of paragraph
(c) to read as follows:
■
§ 348.3
BILLING CODE 4810–33–P; 6210–01–P; 6714–01–P
Prohibitions.
*
*
*
*
*
(c) Major assets. A management
official of a depository organization
with total assets exceeding $10 billion
(or any affiliate of such an organization)
may not serve at the same time as a
management official of an unaffiliated
depository organization with total assets
exceeding $10 billion (or any affiliate of
such an organization), regardless of the
location of the two depository
organizations. * * *
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Amendments to the Stress Testing
Rule for National Banks and Federal
Savings Associations
Office of the Comptroller of the
Currency (OCC), Treasury.
ACTION: Final rule.
AGENCY:
The OCC is adopting a final
rule to amend the OCC’s company-run
stress testing requirements for national
banks and Federal savings associations,
consistent with section 401 of the
Economic Growth, Regulatory Relief,
and Consumer Protection Act.
Specifically, the final rule revises the
minimum threshold for national banks
and Federal savings associations to
conduct stress tests from $10 billion to
$250 billion, revises the frequency by
which certain national banks and
Federal savings associations will be
required to conduct stress tests, and
reduces the number of required stress
testing scenarios from three to two.
DATES: This final rule is effective
November 24, 2019.
FOR FURTHER INFORMATION CONTACT:
Hein Bogaard, Lead Economic Expert,
International Analysis and Banking
Condition, (202) 649–5450; or Henry
Barkhausen, Counsel, or Daniel Perez,
Senior Attorney, (202) 649–5490, Chief
Counsel’s Office; or for persons who are
deaf or hearing-impaired, TTY, (202)
649–5597; Office of the Comptroller of
the Currency, 400 7th Street SW,
Washington, DC 20219.
SUPPLEMENTARY INFORMATION:
SUMMARY:
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I. Background
Section 165(i)(2) of the Dodd-Frank
Wall Street Reform and Consumer
Protection Act of 2010 (Dodd-Frank
Act),1 as initially enacted, required a
national bank or Federal savings
association (FSA) (collectively, banks)
with total consolidated assets of more
than $10 billion to conduct an annual
stress test. Section 165(i)(2)(B) required
these banks to provide a report to the
Office of the Comptroller of the
Currency (OCC) at such time, in such
form, and containing such information
as the OCC may require.2 In addition,
section 165(i)(2)(C) required the OCC to
issue regulations that establish
methodologies for banks conducting
their stress test and required the
methodologies to include at least three
different stress testing scenarios:
‘‘baseline,’’ ‘‘adverse,’’ and ‘‘severely
adverse.’’ 3
In October 2012, the OCC published
in the Federal Register its rule
implementing the Dodd-Frank Act stress
testing requirement (stress testing rule).4
The OCC’s stress testing rule established
two subgroups for covered
institutions—‘‘$10 to $50 billion
covered institutions’’ and ‘‘$50 billion
or over covered institutions’’—and
subjected the two subgroups to different
stress test requirements and deadlines
for reporting and disclosures. In
February 2018, the OCC published a
second rulemaking to implement
additional technical and conforming
changes to the OCC’s stress testing rule.5
The Economic Growth, Regulatory
Relief, and Consumer Protection Act
(EGRRCPA), enacted on May 24, 2018,
amends certain aspects of the companyrun stress testing requirement in section
165(i)(2) of the Dodd-Frank Act.6
Specifically, section 401 of EGRRCPA
raises the minimum asset threshold for
financial companies covered by the
company-run stress testing requirement
from $10 billion to $250 billion in total
consolidated assets; revises the
requirement that financial companies
conduct stress tests on an ‘‘annual’’
basis and instead requires them to be
‘‘periodic’’; and no longer requires the
OCC to provide an ‘‘adverse’’ stresstesting scenario, thus reducing the
number of required stress test scenarios
from three to two. The amendments
made by section 401 of EGRRCPA
1 Public Law 111–203, 124 Stat. 1376 (2010),
codified at 12 U.S.C. 5365.
2 12 U.S.C. 5365(i)(2)(B).
3 12 U.S.C. 5365(i)(2)(C).
4 77 FR 61238 (Oct. 9, 2012).
5 83 FR 7951 (Feb. 23, 2018).
6 Public Law 115–174, 132 Stat. 1296–1368
(2018).
E:\FR\FM\10OCR1.SGM
10OCR1
]]>Agencies
[Federal Register Volume 84, Number 197 (Thursday, October 10, 2019)]
[Rules and Regulations]
[Pages 54465-54472]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-21840]
=======================================================================
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DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
12 CFR Part 26
[Docket ID OCC-2018-0011]
RIN 1557-AE22
FEDERAL RESERVE SYSTEM
12 CFR Parts 212 and 238
[Docket No. R-1641]
RIN 7100-AF31
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 348
RIN 3064-AE57
Thresholds Increase for the Major Assets Prohibition of the
Depository Institution Management Interlocks Act Rules
AGENCY: Office of the Comptroller of the Currency (OCC); Board of
Governors of the Federal Reserve System (Board); and Federal Deposit
Insurance Corporation (FDIC).
ACTION: Final rule.
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[[Page 54466]]
SUMMARY: The OCC, the Board, and the FDIC (collectively, the agencies)
are issuing a final rule that increases the thresholds in the major
assets prohibition for management interlocks for purposes of the
Depository Institution Management Interlocks Act (DIMIA). The DIMIA
major assets prohibition prohibits a management official of a
depository organization with total assets exceeding $2.5 billion (or
any affiliate of such an organization) from serving at the same time as
a management official of an unaffiliated depository organization with
total assets exceeding $1.5 billion (or any affiliate of such an
organization). DIMIA provides that the agencies may adjust, by
regulation, the major assets prohibition thresholds in order to allow
for inflation or market changes. The final rule increases both major
assets prohibition thresholds to $10 billion to account for changes in
the United States banking market since the current thresholds were
established in 1996.
DATES: The final rule is effective on October 10, 2019.
FOR FURTHER INFORMATION CONTACT:
OCC: Daniel Perez, Senior Attorney, Christopher Rafferty, Attorney,
Chief Counsel's Office, (202) 649-5490; or for persons who are deaf or
hearing-impaired, TTY, (202) 649-5597; Office of the Comptroller of the
Currency, 400 7th Street SW, Washington, DC 20219.
Board: Claudia Von Pervieux, Senior Counsel, (202) 452-2552; or
Andrew Hartlage, Counsel, (202) 452-6483, of the Legal Division; Katie
Cox, Manager, (202) 452-2721; or Melissa Clark, Lead Financial
Institution Policy Analyst, (202) 452-2277, of the Division of
Supervision and Regulation, Board of Governors of the Federal Reserve
System, 20th Street and Constitution Avenue NW, Washington, DC 20551.
For the hearing impaired only, Telecommunication Device for the Deaf,
(202) 263-4869, Board of Governors of the Federal Reserve System, 20th
Street and Constitution Avenue NW, Washington, DC 20551.
FDIC: Karen Jones Currie, Senior Examination Specialist, Division
of Risk Management Supervision, (202) 898-3981; Mark Mellon, Counsel,
Legal Division, (202) 898-3884; Federal Deposit Insurance Corporation,
550 17th Street NW, Washington, DC 20429.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Introduction
A. Summary of Final Rule and Policy Objectives
B. Background
II. Proposed Rule and Comments Received
III. Description of Final Rule
IV. Regulatory Analysis
A. Administrative Procedure Act and Effective Date
B. Riegle Community Development and Regulatory Improvement Act
C. Paperwork Reduction Act of 1995
D. Regulatory Flexibility Act
E. OCC Unfunded Mandates Reform Act of 1995 Determination
F. Plain Language
G. The Congressional Review Act
I. Introduction
A. Summary of Final Rule and Policy Objectives
The Office of the Comptroller of the Currency (OCC), the Board of
Governors of the Federal Reserve System (Board), and the Federal
Deposit Insurance Corporation (FDIC) (collectively, the agencies) are
issuing a final rule that increases the major assets prohibition
thresholds for management interlocks for purposes of the Depository
Institution Management Interlocks Act (DIMIA).\1\ The increase in the
thresholds accounts for changes in the United States banking market
since Congress established the current thresholds in 1996. Prior to
this final rule, a management official \2\ of a depository organization
\3\ (or any affiliate of such organization) with total assets exceeding
$2.5 billion could not serve as a management official of an
unaffiliated depository organization (or any affiliate of such
organization) with total assets exceeding $1.5 billion without seeking
an exemption. The final rule increases both thresholds to $10 billion.
---------------------------------------------------------------------------
\1\ 12 U.S.C. 3201 et seq.
\2\ The agencies' rules define ``management official'' to
include directors; advisory or honorary directors of a depository
institution with total assets of $100 million or more; ``senior
executive officers,'' as that term is defined in the agencies' rules
regarding notice of addition or change of directors and senior
executive officers; branch managers; trustees of depository
organizations under the control of trustees; and any persons who
have a ``representative or nominee'' (as the agencies' rules define
that term) serving in any of the capacities described above. 12 CFR
26.2(j)(1) (OCC); 12 CFR 212.2(j)(1) and 238.92(j)(1) (Board); and
12 CFR 348.2(k)(1) (FDIC).
\3\ The agencies' rules define ``depository organization'' to
mean a depository institution or a depository holding company. The
agencies' rules define ``depository institution'' to mean 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, the agencies' rules define ``depository
institution'' also to mean a United States office of a foreign
commercial bank, including a branch or agency. The agencies' rules
define ``depository holding company'' to mean 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. 12 CFR 26.2 (OCC); 12
CFR 212.2 and 238.92 (Board); and 12 CFR 348.2 (FDIC).
---------------------------------------------------------------------------
By increasing the major assets prohibition thresholds, the final
rule reduces the number of depository organizations subject to the
major assets prohibition. This will reduce burden by relieving
depository organizations below the increased thresholds from having to
ask the agencies for exemptions from the major assets prohibition. The
agencies anticipate that raising the asset thresholds will assist small
depository organizations in finding qualified directors by eliminating
the need to file requests for exemptions from the major assets
prohibition.
B. Background
DIMIA--implemented in the agencies' respective rules at 12 CFR
parts 26, 212, 238 subpart J, and 348--fosters competition by
prohibiting a management official from serving at the same time as a
management official of an unaffiliated depository organization in
situations where the management interlock may have an anticompetitive
effect.\4\ DIMIA achieves this purpose through three statutory
prohibitions, which are implemented in the agencies' rules.
---------------------------------------------------------------------------
\4\ 12 CFR 26.1(b) (OCC); 12 CFR 212.1(b) and 238.91(b) (Board);
and 12 CFR 348.1(b) (FDIC).
---------------------------------------------------------------------------
The first prohibition, the community prohibition, precludes a
management official of a depository organization from serving at the
same time as a management official of an unaffiliated depository
organization if the depository organizations in question (or any
depository institution affiliate thereof) have offices in the same
community.\5\ The second prohibition, the relevant metropolitan
statistical area (RMSA) prohibition, precludes a management official of
a depository organization from serving at the same time as a management
official of an unaffiliated depository organization if the depository
organizations in question (or any depository institution affiliate
thereof) have offices in the same RMSA \6\ and each depository
organization has total assets of $50 million or more. The third
prohibition, the major assets prohibition, precludes
[[Page 54467]]
a management official of a depository organization with total assets
exceeding $2.5 billion (or any affiliate of such an organization) from
serving at the same time as a management official of an unaffiliated
depository organization with total assets exceeding $1.5 billion (or
any affiliate of such an organization), regardless of the location of
the two depository organizations. While the first two prohibitions
capture the risk of anticompetitive effects from management interlocks
between depository organizations that operate within overlapping
geographical areas, the major assets prohibition addresses management
interlocks between depository organizations that are large enough that
a management interlock may present anticompetitive concerns despite the
fact that the involved organizations may not have offices in the same
community or RMSA.
---------------------------------------------------------------------------
\5\ The agencies' rules define ``community'' to mean a city,
town, or village, and contiguous and adjacent cities, towns, or
villages. 12 CFR 26.2(c) (OCC); 12 CFR 212.2(c) and 238.92(c)
(Board); and 12 CFR 348.2(c) (FDIC).
\6\ The agencies' rules define ``RMSA'' to mean 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. 12 CFR 26.2(m)
(OCC); 12 CFR 212.2(m) and 238.92(m) (Board); and 12 CFR 348.2(c)
(FDIC).
---------------------------------------------------------------------------
DIMIA allows the agencies to prescribe regulations that permit
otherwise prohibited interlocks under certain circumstances.\7\
Pursuant to the implementing regulations, the appropriate agency may
exempt a prohibited interlock in response to an application by a
depository organization if the appropriate agency finds that the
interlock would not result in a monopoly or substantial lessening of
competition and would not present safety and soundness concerns.\8\
---------------------------------------------------------------------------
\7\ 12 U.S.C. 3207.
\8\ 12 CFR 26.6(a) (OCC); 12 CFR 212.6(a) and 238.96(a) (Board);
and 12 CFR 348.6(a) (FDIC). The agencies have published an
interagency interpretation that explains which agency is the
appropriate agency for purposes of filing a request for a general
exemption under the agencies' rules. See Permissible Interlocks--
Regulatory Exceptions; Agency Approval, 1 Fed. Res. Reg. Serv. (Bd.
of Governors of the Fed. Reserve Sys.) Sec. 3-831 (Nov. 18, 1992),
2006 WL 3928616.
---------------------------------------------------------------------------
The $1.5 billion and $2.5 billion thresholds in the major assets
prohibition were enacted through amendments to DIMIA in the Economic
Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA).\9\
During hearings on EGRPRA, it was noted that the increase of the asset
thresholds to $1.5 billion and $2.5 billion was made because the
previous asset threshold numbers did not ``realistically reflect the
size of large institutions in today's market.'' \10\
---------------------------------------------------------------------------
\9\ See Economic Growth and Regulatory Paperwork Reduction Act
of 1996, Public Law 104-208, Title II, 110 Stat. 3009-9, Sec.
2210(a).
\10\ The Economic Growth and Regulatory Paperwork Reduction
Act--S. 650: Hearings Before the Subcomm. on Fin. Insts. &
Regulatory Relief of the S. Comm. on Banking, Hous., & Urban
Affairs, 104 Cong. 90 (1995) (statement of Eugene A. Ludwig,
Comptroller of the Currency). Initially, the thresholds were set at
$500,000,000 and $1,000,000,000. See Financial Institutions
Regulatory and Interest Rate Control Act of 1978, Public Law 95-630,
Title II, Depository Institutions Management Interlocks Act, 92
Stat. 3641, 3672 (Nov. 10, 1978).
---------------------------------------------------------------------------
DIMIA, as amended, also provides that the agencies may adjust the
thresholds as necessary ``to allow for inflation or market changes.''
\11\ Unadjusted since 1996, the major assets prohibition thresholds set
forth in EGRPRA do not reflect the growth and consolidation among U.S.
depository organizations that has occurred in the intervening years and
do not realistically reflect the size of large institutions today. For
instance, based on regulatory reporting, total assets at depository
organizations have grown by more than 250 percent between the fourth
quarter of 1996 and the fourth quarter of 2018. Moreover, in a March
2017 report to Congress mandated by EGRPRA, the agencies stated that
they intended to reduce regulatory burden by adjusting the major assets
thresholds in the agencies' DIMIA regulations.\12\
---------------------------------------------------------------------------
\11\ 12 U.S.C. 3203.
\12\ Federal Financial Institutions Examination Council, Joint
Report to Congress: Economic Growth and Regulatory Paperwork
Reduction Act, 82 FR 15900, 15903 (Mar. 30, 2017), https://www.ffiec.gov/pdf/2017_FFIEC_EGRPRA_Joint-Report_to_Congress.pdf.
---------------------------------------------------------------------------
II. Proposed Rule and Comments Received
On January 31, 2019, the agencies published for comment a notice of
proposed rulemaking (proposed rule or proposal) to amend the agencies'
DIMIA regulations.\13\ The proposed rule would have increased the major
assets prohibition thresholds from $1.5 billion and $2.5 billion to $10
billion each. Alternatively, the proposed rule requested comment on
three calibrations that would have increased the major assets
prohibition thresholds based on market changes or inflation that had
occurred during the period following the establishment of the
thresholds. The proposed rule also described the procedures the
agencies would use to increase the thresholds to reflect inflation in
the future.
---------------------------------------------------------------------------
\13\ 84 FR 604 (Jan. 31, 2019).
---------------------------------------------------------------------------
In response to the proposed rule, the agencies received six comment
letters,\14\ five of which were responsive. Four of the five comment
letters expressed support for increasing the major assets prohibition
thresholds, while the fifth comment letter, without expressing an
opinion about the thresholds, suggested that the agencies use clear
language and consider ``the most recent developments for measuring
market change.'' Two of the five comment letters also included a
suggestion that was outside the scope of the proposal--namely, that the
agencies expand the number of exemptions from the definition of
``management official.''
---------------------------------------------------------------------------
\14\ Three comment letters were submitted by industry groups,
and three comment letters were submitted by individuals.
---------------------------------------------------------------------------
Comments Regarding the Major Assets Prohibition Thresholds
Two commenters specifically expressed support for the agencies'
proposal to increase the major assets prohibition thresholds to $10
billion. One commenter noted that increasing the thresholds in such a
manner would help community banks find qualified management officials,
especially in rural areas. The second commenter supported the $10
billion thresholds but suggested that the agencies tie further,
periodic threshold adjustments to an asset growth index, rather than to
inflation.\15\ The commenter suggested that such periodic adjustments
could be made through a direct final rule without notice and comment.
---------------------------------------------------------------------------
\15\ Specifically, the commenter recommended that the agencies
adjust the thresholds based on the annual percentage change in
commercial bank assets reflected in the Federal Reserve's ``H.8
Assets and Liabilities of Commercial Banks in the United States.''
---------------------------------------------------------------------------
Two commenters generally supported increasing the thresholds but
provided alternatives to the proposal. One commenter suggested that the
agencies adjust the thresholds based on a depository organization's
share of total industry assets, centered on the growth of average
assets per bank from 1996 to 2018. The second commenter suggested that
the agencies adjust the thresholds based on asset growth and stated
that Congress intended for DIMIA to have two separate thresholds,
rather than a single, consistent threshold in order to make it more
difficult for a larger depository organization to control a smaller
depository organization. Both commenters suggested that their proposed
alternative methods for adjusting the thresholds would better reflect
the anticompetitive concerns embodied in DIMIA.
As explained in more detail in the following section, the agencies
believe that the proposed $10 billion asset thresholds appropriately
capture the anticompetitive risk that the major assets prohibition is
intended to address by prohibiting interlocks between larger depository
organizations while exempting smaller or community-banking-
organization-sized depository organizations. A $10 billion asset
threshold is consistent with thresholds that Congress and the agencies
have used to distinguish between small institutions and larger
institutions. Further, establishing identical asset
[[Page 54468]]
threshold levels will enable depository organizations to ascertain more
easily whether they may be subject to the major assets prohibition.
DIMIA does not require the agencies to set the thresholds at two
different levels, nor do the agencies believe that setting the
thresholds at different levels would better serve the purpose of
DIMIA's major assets prohibition. In consideration of these factors,
the agencies believe increasing both asset thresholds to $10 billion is
appropriate.
With regard to the suggestion that the agencies tie future
threshold adjustments to an asset growth index, the agencies believe
that changes to the methodology for future, periodic adjustments are
outside the scope of this rulemaking, which requested comment on a one-
time adjustment to the asset thresholds to account for market changes.
The agencies have existing authority under DIMIA and the agencies'
DIMIA regulations to make periodic, discretionary adjustments to the
thresholds to account for inflation through direct final rules without
notice and comment.\16\ In the proposal, the agencies stated that,
following adjustment of the thresholds by the proposed rule and
consistent with existing authority, the agencies would make further
adjustments to the thresholds to account for inflation by publishing a
direct final rule without notice and comment.\17\ The agencies noted
that if further adjustments to the thresholds are warranted for reasons
other than inflation, the agencies would propose another adjustment
through a subsequent notice of proposed rulemaking and seek public
comment on the proposal.\18\ As a reference for future, periodic
adjustments, the agencies believe that making future adjustments based
on the inflation measure in the agencies' rules would be less volatile
than making future adjustments based on asset growth and would be more
appropriate for a recurring process.
---------------------------------------------------------------------------
\16\
\17\ ``The [agencies] will adjust these thresholds, as
necessary, based on the year-to-year change in the average of the
Consumer Price Index for the Urban Wage Earners and Clerical
Workers, not seasonally adjusted, with rounding to the nearest $100
million. The [agencies] will announce the revised thresholds by
publishing a final rule without notice and comment in the Federal
Register.'' 12 CFR 26.3(c), 212.3(c), 238.93(c), and 348.3(c).
\18\ See 84 FR 604 at 607 (Jan. 31, 2019).
---------------------------------------------------------------------------
Comments Discussing Other Aspects of DIMIA
Two commenters suggested that the agencies expand the current list
of exemptions from the definition of ``management official'' contained
in the agencies' rules. One of the commenters suggested that the
agencies revise the definition to exempt management officials at non-
depository affiliates and management officials of foreign affiliates.
Another commenter suggested that the agencies exempt depository
organizations' foreign affiliates that do not engage in business or
activities in the United States.
The proposed rule did not contemplate changes to the definition of
``management official,'' and the agencies are not adopting the
commenters' suggestions at this time; however, the agencies will
consider incorporating these suggestions in a future revision to the
agencies' rules.
III. Description of Final Rule
After considering the comments received, the agencies are adopting
without change the proposal to increase the major assets prohibition
thresholds from $1.5 billion and $2.5 billion to $10 billion each. As
finalized, the major assets prohibition will prohibit management
interlocks between unaffiliated depository organizations with total
assets exceeding $10 billion (or any affiliates of such organizations).
The final rule's increase to the major assets prohibition
thresholds, and the application of the major assets prohibition to
larger depository organizations rather than small depository
organizations (i.e., community banking organizations), is consistent
with the purpose of the major assets prohibition of DIMIA.\19\ A major
assets prohibition with a $10 billion asset threshold will prohibit
interlocks between larger depository organizations, which could present
a risk of anticompetitive conduct at the level of the U.S. banking
market, while exempting smaller or community-banking-organization-sized
depository organizations, which generally operate in regional markets
and do not present the same competitive risks to the broader U.S.
banking market.\20\
---------------------------------------------------------------------------
\19\ Legislative history indicates that Congress intended for
the major assets prohibition to apply to ``larger'' organizations.
See H.R. Rep. No. 95-1383, at 5 (1978); S. Rep. No. 95-323, at 13
(1977).
\20\ While depository organizations with $10 billion or less in
total assets will not be covered by the major assets prohibition
against management interlocks, those depository organizations are
still subject to the community and RMSA prohibitions.
---------------------------------------------------------------------------
In addition, the final rule is consistent with the current
thresholds that Congress and the agencies have used to distinguish
between small institutions and larger institutions. For example,
sections 201 and 203 of the Economic Growth, Regulatory Relief, and
Consumer Protection Act of 2018 provide certain burden relief for
institutions with less than $10 billion in total consolidated
assets.\21\ Additionally, the Dodd-Frank Wall Street Reform and
Consumer Protection Act uses a $10 billion threshold to distinguish
between large banks subject to supervision by the Consumer Financial
Protection Bureau and small banks subject to prudential regulator
supervision.\22\ A $10 billion threshold also is consistent with the
asset threshold used by the Board to distinguish between community
banking organizations and larger banking organizations for supervisory
and regulatory purposes,\23\ the asset threshold used by the FDIC to
distinguish between ``small'' and ``large'' institutions for purposes
of its deposit insurance assessment regulations,\24\ and the asset
threshold used by the OCC to distinguish community banks from midsize
and large banks for supervisory purposes.\25\ Further, having a single,
consistent asset threshold will simplify the agencies' DIMIA
regulations and enable depository organizations to identify more easily
whether they may be subject to the major assets prohibition.
---------------------------------------------------------------------------
\21\ Economic Growth, Regulatory Relief, and Consumer Protection
Act of 2018, Public Law 115-174, Sec. 201, 203, 132 Stat. 1296,
1306, 1309 (2018) (enacting a ``Community Bank Leverage Ratio''
capital simplification framework that is generally available to
depository institutions and depository institution holding companies
with $10 billion or less in total consolidated assets and exempting
generally from the prohibitions of section 13 of the Bank Holding
Company Act of 1956, also known as the ``Volcker Rule,'' certain
entities with $10 billion or less in total consolidated assets).
\22\ Public Law 111-203, Sec. 1025 & 1026, 124 Stat. 1376,
1990-95 (2010).
\23\ Bd. of Governors of the Fed. Reserve Sys., Commercial Bank
Examination Manual (rev. Jan. 2018), https://www.federalreserve.gov/publications/files/cbem.pdf.
\24\ See 12 CFR 327.8(e) and (f). For the purposes of the FDIC's
assessment regulations, a ``small institution'' generally is an
insured depository institution with less than $10 billion in total
assets. Generally, a ``large institution'' is an insured depository
institution with $10 billion or more in total assets or that is
treated as a large institution for assessment purposes under section
327.16(f).
\25\ Comptroller's Handbook, ``OCC Community Bank Supervision''
(June 2018), https://www.occ.gov/publications/publications-by-type/comptrollers-handbook/community-bank-supervision/pub-ch-community-bank-supervision.pdf.
---------------------------------------------------------------------------
The final rule increases the number of depository organizations
that would no longer be subject to the major assets prohibition and
therefore reduces the number of institutions that need to seek an
exemption from the major assets prohibition from the appropriate
agency.
As of December 31, 2018, 981 depository organizations had total
assets of more than $1.5 billion and were
[[Page 54469]]
subject to the major assets prohibition.\26\ In addition, 751
depository organizations with total assets of more than the $2.5
billion threshold were subject to restrictions on management interlocks
with unaffiliated depository organizations with total assets exceeding
the $1.5 billion threshold. Raising the $1.5 billion asset threshold to
$10 billion would exempt 672 depository organizations from the major
assets prohibition as of December 31, 2018. As of December 31, 2018,
309 depository organizations reported total assets greater than $10
billion and would remain subject to the major assets prohibition.
---------------------------------------------------------------------------
\26\ The analysis in this preamble reflecting changes in the
number of depository organizations exempted does not incorporate
credit unions because this final rule does not apply to credit
unions. Data used in this analysis were drawn from the December 31,
1996, and December 31, 2018, Consolidated Reports of Condition and
Income (Call Reports), Consolidated Financial Statements for Holding
Companies, Parent Company Only Financial Statements for Large
Holding Companies, Parent Company Only Financial Statements for
Small Holding Companies, and Reports of Assets and Liabilities of
U.S. Branches and Agencies of Foreign Banks.
---------------------------------------------------------------------------
IV. Regulatory Analysis
A. Administrative Procedure Act and Effective Date
The agencies are issuing the final rule without the 30-day delayed
effective date ordinarily prescribed by the Administrative Procedure
Act (APA).\27\ Pursuant to section 553(d) of the APA, the required
publication of a substantive rule shall be made not less than 30 days
before its effective date, except for, among other things, ``a
substantive rule which grants or recognizes an exemption or relieves a
restriction.'' \28\
---------------------------------------------------------------------------
\27\ 5 U.S.C. 553.
\28\ 5 U.S.C. 553(d)(1).
---------------------------------------------------------------------------
The final rule increases the asset thresholds for the major assets
prohibition, which will increase the number of depository organizations
that are no longer subject to the prohibition and therefore reduce the
number of depository organizations that will need to seek an exemption
from the prohibition. The effect of the final rule will be to relieve
certain depository organizations from the restrictions of the DIMIA
major assets prohibition. Accordingly, the agencies are issuing the
final rule with an immediate effective date.
B. Riegle Community Development and Regulatory Improvement Act
Section 302(a) of the Riegle Community Development and Regulatory
Improvement Act of 1994 (CDRI) requires that each Federal banking
agency, in determining the effective date and administrative compliance
requirements for new regulations that impose additional reporting,
disclosure, or other requirements on depository institutions, consider,
consistent with principles of safety and soundness and the public
interest, any administrative burdens that such regulations would place
on depository institutions, including small depository institutions,
and customers of depository institutions, as well as the benefits of
such regulations. Section 302(b) requires that new regulations and
amendments to regulations that impose additional reporting,
disclosures, or other new requirements on depository institutions
generally shall take effect on the first day of a calendar quarter that
begins on or after the date on which the regulations are published in
final form, subject to certain exceptions that are not relevant here.
The final rule does not impose additional reporting, disclosure, or
other requirements on depository institutions, including small
depository institutions or customers of depository institutions;
therefore, section 302 of CDRI does not apply. The agencies note,
however, that in determining the effective date and administrative
compliance requirements for this final rule, they considered the
administrative burdens and benefits of the rule, including that the
rule reduces burden on the depository organizations to which it
applies.
C. Paperwork Reduction Act of 1995
Certain provisions of the final rule contain a ``collection of
information'' within the meaning of the Paperwork Reduction Act of 1995
(PRA) (44 U.S.C. 3501-3521). In accordance with the requirements of the
PRA, the agencies may not conduct or sponsor, and the respondent is not
required to respond to, an information collection unless it displays a
currently valid Office of Management and Budget (OMB) control number.
The OMB control number for the OCC is 1557-0014; and the FDIC's is
3064-0118. These information collections will be extended for three
years, with revision. Although the Board has previously included these
collections of information under OMB control number 7100-0134, the
collections of information are not currently cleared under the PRA.
Therefore, the Board is implementing a new collection of information in
connection with this final rule. The agencies did not receive any
specific comments on the PRA. The information collection requirements
contained in the proposed rulemaking were submitted by the OCC and FDIC
to OMB under section 3507(d) of the PRA (44 U.S.C. 3507(d)) and section
1320.11 of the OMB's implementing regulations (5 CFR part 1320). OMB
filed a comment in response to the submissions, instructing the OCC and
FDIC to resubmit at the final rule stage and discuss the reason for any
increase in burden. The OCC and FDIC have resubmitted the information
collection requirements to OMB in connection with the final rule. The
Board reviewed the final rule under the authority delegated to the
Board by OMB. The FDIC's and OCC's burden increased slightly through an
effort to conform its burden estimates to those of the other agencies.
In addition, the agencies have increased their estimates for the burden
associated with recordkeeping from the initial proposal to reflect the
fact that the number of respondents that may engage in recordkeeping
would not be decreased by the final rule. Additionally, the agencies
have removed from their burden table estimates references to 12 CFR
26.6(b) (OCC); 12 CFR 212.6(b) and 238.96(b) (Board); and 12 CFR
248.6(b) (FDIC), as those sections do not contain an information
collection. This change has not impacted the estimated burden
calculation.
PRA Burden Estimates
OCC
OMB control number: 1557-0014.
Estimated number of respondents: 2.
Estimated average hours per response:
Reporting Sections 26.4(h)(1)(i)-4.
Recordkeeping Section 26.5(b)-3.
Estimated annual burden hours: 14.
Board
OMB control number: 7100-NEW (The current management official
interlocks reporting and recordkeeping requirements are housed under
OMB control number 7100-0134 and will be separated out in a new OMB
control number).
Estimated number of respondents: 4 for reporting requirements and 8
for recordkeeping requirements.
Estimated average hours per response:
Reporting Sections 212.4(h)(1)(i) and 238.94(h)(1)(i)-4.
Recordkeeping Section 212.5(b) and 238.95(b)-3.
Estimated annual burden hours: 40.
FDIC
OMB control number: 3064-0118.
Estimated number of respondents: 6.
Estimated average hours per response:
Reporting Sections 348.4(h)(1)(i)-4.
Recordkeeping Section 348.5(b)-3.
Estimated annual burden hours: 42.
[[Page 54470]]
D. Regulatory Flexibility Act
The Regulatory Flexibility Act \29\ (RFA) requires an agency either
to provide a final regulatory flexibility analysis with a final rule
for which general notice of proposed rulemaking is required or to
certify that the proposed rule will not have a significant economic
impact on a substantial number of small entities. The U.S. Small
Business Administration (SBA) establishes size standards that define
which entities are small businesses for purposes of the RFA.\30\ Under
regulations issued by the SBA, the size standard to be considered a
small business for banking entities subject to the proposed rule is
$600 million or less in consolidated assets.\31\ Under 5 U.S.C. 605(b),
this analysis is not required if an agency certifies that the rule will
not have a significant economic impact on a substantial number of small
entities and publishes its certification and a brief explanatory
statement in the Federal Register along with its rule.
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\29\ 5 U.S.C. 601 et seq.
\30\ U.S. SBA, Table of Small Business Size Standards Matched to
North American Industry Classification System Codes, available at
https://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf.
\31\ See 13 CFR 121.201.
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OCC: The OCC currently supervises approximately 782 small
entities.\32\ Currently, the major assets prohibition of DIMIA prevents
a management official of a depository organization with total assets
exceeding $2.5 billion (depository organization threshold) or any
affiliate of such organization from serving as a management official of
an unaffiliated depository organization with total assets exceeding
$1.5 billion (unaffiliated organization threshold). This final rule
will increase both thresholds to $10 billion in assets, which will only
impact banking organizations with total consolidated assets between the
current thresholds of $1.5 billion and $2.5 billion and the new
threshold of $10 billion. No OCC-regulated small entities are impacted
by these changes. Additionally, the changes in this final rule do not
impose any new reporting, recordkeeping, or other compliance
requirements. For these reasons, the OCC certifies that the final rule
will not have a significant economic impact on a substantial number of
small entities.
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\32\ The OCC bases its estimate of the number of small entities
on the SBA's size thresholds for commercial banks and savings
institutions, and trust companies, which are $600 million and $41.5
million, respectively. Consistent with the General Principles of
Affiliation, 13 CFR 121.103(a), the OCC counts the assets of
affiliated financial institutions when determining if it should
classify an OCC-supervised institution as a small entity. The OCC
uses December 31, 2018, to determine size because a ``financial
institution's assets are determined by averaging the assets reported
on its four quarterly financial statements for the preceding year.''
See footnote 8 of the U.S. Small Business Administration's Table of
Size Standards.
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Board: In accordance with section 603(a) of the RFA,\33\ the Board
published an Initial Regulatory Flexibility Analysis (IFRA) with the
proposal.\34\ The Board solicited comment on the effect of the proposal
on small entities. The Board did not receive any comment on the IFRA.
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\33\ 5 U.S.C. 603.
\34\ 84 FR 604 (Jan. 31, 2019).
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The RFA requires an agency to prepare a final regulatory
flexibility analysis (FRFA) unless the agency certifies that the rule
will not, if promulgated, have a significant impact on a substantial
number of small entities. The FRFA must contain: (1) A statement of the
need for, and objectives of, the rule; (2) a statement of the
significant issues raised by the public comments in response to the
IRFA, a statement of the agency's assessment of such issues, and a
statement of any changes made in the proposed rule as a result of such
comments; (3) the response of the agency to any comments filed by the
Chief Counsel for Advocacy of the SBA in response to the proposed rule,
and a detailed statement of any changes made to the proposed rule in
the final rule as a result of the comments; (4) a description of and an
estimate of the number of small entities to which the rule will apply
or an explanation of why no such estimate is available; (5) a
description of the projected reporting, recordkeeping, and other
compliance requirements of the rule, including an estimate of the
classes of small entities that will be subject to the requirement and
the type of professional skills necessary for preparation of the report
or record; (6) a description of the steps the agency has taken to
minimize the significant economic impact on small entities, including a
statement for selecting or rejecting the other significant alternatives
to the rule considered by the agency.
1. Statement of the need for, and objectives of, the final rule.
As discussed in the Supplementary Information, the final rule
increases the major assets prohibition thresholds for management
interlocks in the Board's rules implementing DIMIA. Under the current
major assets prohibition, a management official of a depository
organization with total assets exceeding $2.5 billion (or any affiliate
of such an organization) is prohibited from serving at the same time as
a management official of an unaffiliated depository organization with
total assets exceeding $1.5 billion (or any affiliate of such an
organization), regardless of the location of the two depository
organizations. For these purposes, the term ``depository organization''
means a depository institution or a depository holding company.
``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.
``Depository holding company'' means a bank holding company or a
savings and loan holding company (as more fully defined in section 202
of DIMIA) having its principal office located in the United States.\35\
As discussed above, the Board's objective in issuing this rule is to
reduce the number of depository organizations subject to the major
assets prohibition. The Board has authority under DIMIA to prescribe
regulations necessary to carry out DIMIA with respect to state banks
that are members of the Federal Reserve System, bank holding companies,
and savings and loan holding companies.\36\
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\35\ 12 CFR 212.2 and 231.92.
\36\ 12 U.S.C. 3207(2).
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2. A discussion of the significant issues raised by public comments
in response to the IRFA, and the Board's response to any comments filed
by the Chief Counsel for Advocacy of the SBA in response to the
proposed rule.
The Board did not receive any comments on the IRFA that it
published in connection with the proposal. In addition, the Chief
Counsel for Advocacy of the SBA did not file any comments in response
to the proposal. Accordingly, no changes were made to the proposal as a
result of RFA-related comments.
3. Description and estimate of the number of entities to which the
rule will apply.
The rule applies to state member banks, bank holding companies, and
savings and loan holding companies having their principal offices in
the United States. Under regulations issued by the SBA, a small entity
includes a state member bank, bank holding company, or savings and loan
holding company with total assets of $600 million or less and trust
companies with
[[Page 54471]]
total assets of $41.5 million or less.\37\ On average since the second
quarter of 2018, there were approximately 2,976 small bank holding
companies, 133 small savings and loan holding companies, and 70 small
state member banks. The rule increases the total asset level at which
depository organizations and their affiliates become subject to the
major assets prohibition from $1.5 billion and $2.5 billion to $10
billion and $10 billion, respectively.
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\37\ See 13 CFR 121.201.
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4. Description of the projected reporting, recordkeeping, and other
compliance requirements of the rule.
The changes to the major assets prohibition do not impose any new
reporting, recordkeeping, and other compliance requirements.
5. Description of the steps take to minimize any significant
economic impact on small entities.
Based on its analysis and for the reasons stated above, the Board
believes that this final rule will not have a significant economic
impact on a substantial number of small entities.
FDIC: The Regulatory Flexibility Act (RFA) generally requires that,
in connection with a final rule, an agency prepare and make available
for public comment a final regulatory flexibility analysis describing
the impact of the rulemaking on small entities.\38\ A regulatory
flexibility analysis is not required, however, if the agency certifies
that the rule will not have a significant economic impact on a
substantial number of small entities. The Small Business Administration
(SBA) has defined ``small entities'' to include banking organizations
with total assets less than or equal to $600 million.\39\ Generally,
the FDIC considers a significant effect to be a quantified effect in
excess of 5 percent of total annual salaries and benefits per
institution, or 2.5 percent of total non-interest expenses. The FDIC
believes that effects in excess of these thresholds typically represent
significant effects for FDIC-supervised institutions. The FDIC
supervises 3,489 depository institutions,\40\ of which 2,741 are
defined as small banking entities by the terms of the RFA.\41\
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\38\ 5 U.S.C. 601 et seq.
\39\ The SBA defines a small banking organization as having $600
million or less in assets, where an organization's ``assets are
determined by averaging the assets reported on its four quarterly
financial statements for the preceding year.'' See 13 CFR 121.201
(as amended by 84 FR 34261, effective August 19, 2019). In its
determination, the ``SBA counts the receipts, employees, or other
measure of size of the concern whose size is at issue and all of its
domestic and foreign affiliates.'' See 13 CFR 121.103. Following
these regulations, the FDIC uses a covered entity's affiliated and
acquired assets, averaged over the preceding four quarters, to
determine whether the covered entity is ``small'' for the purposes
of RFA.
\40\ FDIC-supervised institutions are set forth in 12 U.S.C.
1813(q)(2).
\41\ Call Report, December 31, 2018.
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The final rule only affects institutions with total consolidated
assets between the current thresholds of $1.5 billion and $2.5 billion
and the new threshold of $10 billion. Therefore, the final rule will
likely affect zero small entities.
Accordingly, the FDIC believes that the final rule will not have a
significant impact on a substantial number of small entities. For the
reasons described above and pursuant to 5 U.S.C. 605(b), the FDIC
certifies that the final rule will not have a significant economic
impact on a substantial number of small entities.
E. OCC Unfunded Mandates Reform Act of 1995 Determination
The OCC analyzed the final rule under the factors set forth in the
Unfunded Mandates Reform Act of 1995 (UMRA) (2 U.S.C. 1532). Under this
analysis, the OCC considered whether the proposed rule includes a
Federal mandate that may result in the expenditure by State, local, and
Tribal governments, in the aggregate, or by the private sector, of $100
million or more in any one year (adjusted for inflation). The final
rule will relieve burden and will not impose any new mandates.
Therefore, the OCC concludes that the proposed rule will not result in
an expenditure of $100 million or more annually by state, local, and
tribal governments or by the private sector.
F. Plain Language
Section 722 of the Gramm-Leach-Bliley Act requires the Federal
banking agencies to use plain language in all proposed and final rules
published after January 1, 2000. The agencies received one comment that
generally suggested that the agencies use clear language in this final
rule. The agencies believe the final rule is presented in a simple and
straightforward manner. Accordingly, the agencies are issuing the final
rule without change.
G. The Congressional Review Act
Pursuant to the Congressional Review Act, the Office of Management
and Budget's Office of Information and Regulatory Affairs designated
this rule as not a ``major rule,'' as defined at 5 U.S.C. 804(2).
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 238
Administrative practice and procedure, Banks, banking, Holding
companies, Reporting and recordkeeping requirements, Securities.
12 CFR Part 348
Antitrust, Banks, banking, Holding companies.
Authority and Issuance
For the reasons stated in the preamble, the OCC amends 12 CFR part
26, the Board amends 12 CFR parts 212 and 238, and the FDIC amends 12
CFR part 348 as follows:
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
PART 26--MANAGEMENT OFFICIAL INTERLOCKS
0
1. The authority citation for part 26 continues to read as follows:
Authority: 12 U.S.C. 1, 93a, 1462a, 1463, 1464, 3201-3208,
5412(b)(2)(B).
0
2. Section 26.3 is amended by revising the first sentence of paragraph
(c) to read as follows:
Sec. 26.3 Prohibitions.
* * * * *
(c) Major assets. A management official of a depository
organization with total assets exceeding $10 billion (or any affiliate
of such an organization) may not serve at the same time as a management
official of an unaffiliated depository organization with total assets
exceeding $10 billion (or any affiliate of such an organization),
regardless of the location of the two depository organizations. * * *
Federal Reserve System
PART 212--MANAGEMENT OFFICIAL INTERLOCKS (REGULATION L)
0
3. The authority citation for part 212 continues to read as follows:
Authority: 12 U.S.C. 3201-3208; 15 U.S.C. 19.
0
4. Section 212.3 is amended by revising the first sentence of paragraph
(c) to read as follows:
[[Page 54472]]
Sec. 212.3 Prohibitions.
* * * * *
(c) Major assets. A management official of a depository
organization with total assets exceeding $10 billion (or any affiliate
of such an organization) may not serve at the same time as a management
official of an unaffiliated depository organization with total assets
exceeding $10 billion (or any affiliate of such an organization),
regardless of the location of the two depository organizations. * * *
PART 238--SAVINGS AND LOAN HOLDING COMPANIES (REGULATION LL)
0
5. The authority citation for part 238 is revised to read as follows:
Authority: 5 U.S.C. 552, 559; 12 U.S.C. 1462, 1462a, 1463,
1464, 1467, 1467a, 1468, 1813, 1817, 1829e, 1831i, 1972, 3201-3208;
15 U.S.C. 78l.
0
6. Section 238.93 is amended by revising the first sentence of
paragraph (c) to read as follows:
Sec. 238.93 Prohibitions.
* * * * *
(c) Major assets. A management official of a depository
organization with total assets exceeding $10 billion (or any affiliate
of such an organization) may not serve at the same time as a management
official of an unaffiliated depository organization with total assets
exceeding $10 billion (or any affiliate of such an organization),
regardless of the location of the two depository organizations. * * *
Federal Deposit Insurance Corporation
PART 348--MANAGEMENT OFFICIAL INTERLOCKS
0
7. The authority citation for part 348 continues to read as follows:
Authority: 12 U.S.C. 3207, 12 U.S.C. 1823(k).
0
8. Section 348.3 is amended by revising the first sentence of paragraph
(c) to read as follows:
Sec. 348.3 Prohibitions.
* * * * *
(c) Major assets. A management official of a depository
organization with total assets exceeding $10 billion (or any affiliate
of such an organization) may not serve at the same time as a management
official of an unaffiliated depository organization with total assets
exceeding $10 billion (or any affiliate of such an organization),
regardless of the location of the two depository organizations. * * *
Dated: October 1, 2019.
Joseph M. Otting,
Comptroller of the Currency.
By order of the Board of Governors of the Federal Reserve
System, September 27, 2019.
Ann E. Misback,
Secretary of the Board.
Federal Deposit Insurance Corporation.
By order of the Board of Directors.
Dated at Washington, DC, on August 20, 2019.
Valerie J. Best,
Assistant Executive Secretary.
[FR Doc. 2019-21840 Filed 10-9-19; 8:45 am]
BILLING CODE 4810-33-P; 6210-01-P; 6714-01-P
