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WBK Industry News - Federal Regulatory Developments

Agencies Propose to Increase Management Interlocks Rule Thresholds

The Federal Reserve Board, FDIC and OCC (collectively, the Agencies) recently issued a notice of proposed rulemaking, inviting comments on a proposal to increase the major assets prohibition thresholds for management interlocks under the rules implementing the Depository Institution Management Interlocks Act (DIMIA), which prevent a director or other management official of a depository organization from serving at more than one depository organization at the same time, absent an exemption.

The current rules implementing the DIMIA were established by the Agencies in 1996.  These rules generally prohibit a management official of a depository organization (or any affiliate) with total assets exceeding $2.5 billion from serving at the same time as a management official of an unaffiliated depository organization (or any affiliate) with total assets exceeding $1.5 billion.  Under the proposed rule, both asset thresholds would increase to $10 billion.  Accordingly, as proposed, the major assets prohibition would restrict management interlocks between unaffiliated depository organizations with total assets exceeding $10 billion (or any affiliates of such organizations).

The Agencies also proposed and invited comment on three alternative ways to increase the management interlocks rule thresholds.  The first alternative approach would adjust the thresholds so that approximately the same percentage of the total number of banking organizations that were covered by the original thresholds as of the fourth quarter of 1996 would be covered as of the fourth quarter of 2017. Under this alternative approach, the current thresholds of $1.5 billion and $2.5 billion would be raised to $7.9 billion and $11.8 billion, respectively.

The second alternative approach would adjust the thresholds to reflect the rate of asset growth for depository organizations over the period between the fourth quarter of 1996 and the fourth quarter of 2017. Under this alternative approach, the current thresholds of $1.5 billion and $2.5 billion would be raised to $5.3 billion and $8.8 billion, respectively.

The third alternative approach would adjust the thresholds based on the rate of inflation from the fourth quarter of 1996 to the fourth quarter of 2017.  Under this alternative approach, the current thresholds of $1.5 billion and $2.5 billion would be raised to $2.3 billion and $3.9 billion, respectively.

Comments will be accepted for 60 days after publication in the Federal Register.  A copy of the proposed rule can be found here.