Thresholds Increase for the Major Assets Prohibition of the Depository Institution Management Interlocks Act Rules

Citation84 FR 54465
Record Number2019-21840
Published date10 October 2019
SectionRules and Regulations
CourtFederal Deposit Insurance Corporation,The Comptroller Of The Currency Office
Federal Register, Volume 84 Issue 197 (Thursday, October 10, 2019)
[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.
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                 \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).
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                 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.
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                 \4\ 12 CFR 26.1(b) (OCC); 12 CFR 212.1(b) and 238.91(b) (Board);
                and 12 CFR 348.1(b) (FDIC).
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                 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.
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                 \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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                 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\
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                 \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.
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                 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\
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                 \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).
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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\
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                 \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.
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                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.
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                 \13\ 84 FR 604 (Jan. 31, 2019).
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                 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.''
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                 \14\ Three comment letters were submitted by industry groups,
                and three comment letters were submitted by individuals.
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                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.
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                 \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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                 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.
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                 \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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                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\
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                 \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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                 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.
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                 \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.
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                 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.
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                 \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.
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                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\
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                 \27\ 5 U.S.C. 553.
                 \28\ 5 U.S.C. 553(d)(1).
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                 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.
                ---------------------------------------------------------------------------
                 \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.
                ---------------------------------------------------------------------------
                 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.
                ---------------------------------------------------------------------------
                 \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.
                ---------------------------------------------------------------------------
                 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.
                ---------------------------------------------------------------------------
                 \33\ 5 U.S.C. 603.
                 \34\ 84 FR 604 (Jan. 31, 2019).
                ---------------------------------------------------------------------------
                 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\
                ---------------------------------------------------------------------------
                 \35\ 12 CFR 212.2 and 231.92.
                 \36\ 12 U.S.C. 3207(2).
                ---------------------------------------------------------------------------
                 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.
                ---------------------------------------------------------------------------
                 \37\ See 13 CFR 121.201.
                ---------------------------------------------------------------------------
                 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\
                ---------------------------------------------------------------------------
                 \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.
                ---------------------------------------------------------------------------
                 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
                

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