12 CFR 711 - Management Official Interlock

§ 710.6

12 CFR Ch. VII (1–1–16 Edition)

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PART 711—MANAGEMENT
OFFICIAL INTERLOCKS
Sec.
711.1 Authority, purpose, and scope.
711.2 Definitions.
711.3 Prohibitions.
711.4 Interlocking relationships permitted
by statute.

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National Credit Union Administration

§ 711.2

711.5 Small market share exemption.
711.6 General exemption.
711.7 Change in circumstances.
711.8 Enforcement.
AUTHORITY: 12 U.S.C. 1757 and 3201–3208.
SOURCE: 61 FR 50702, Sept. 27, 1996, unless
otherwise noted.

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§ 711.1 Authority, purpose, and scope.
(a) Authority. This part is issued
under the provisions of the Depository
Institution Management Interlocks
Act (Interlocks Act) (12 U.S.C. 3201 et
seq).
(b) Purpose. The purpose of the Interlocks Act and this part is to foster
competition by generally prohibiting a
management official from serving two
nonaffiliated depository organizations
in situations where the management
interlock likely would have an anticompetitive effect.
(c) Scope. This part applies to management officials of federally insured
credit unions. Section 711.4(c) exempts
a management official of a credit union
from the prohibitions of the Interlocks
Act when the individual serves as a
management official of another credit
union. Therefore, the Interlocks Act
prohibitions contained in this part
only apply to a management official of
a credit union when that individual
also serves as a management official of
another type of depository organization (usually a bank or thrift).
§ 711.2 Definitions.
For purposes of this part, the following definitions apply:
(a) Affiliate. (1) The term affiliate has
the meaning given in section 202 of the
Interlocks Act (12 U.S.C. 3201). For purposes of that section 202, shares held by
an individual include shares held by
members of his or her immediate family. ‘‘Immediate family’’ means spouse,
mother, father, child, grandchild, sister, brother, or any of their spouses,
whether or not any of their shares are
held in trust.
(2) For purposes of section 202(3)(B) of
the
Interlocks
Act
(12
U.S.C.
3201(3)(B)), an affiliate relationship involving a depository institution based
on common ownership does not exist if
the appropriate federal supervisory
agency determines, after giving the affected persons the opportunity to re-

spond, that the asserted affiliation was
established in order to avoid the prohibitions of the Interlocks Act and does
not represent a true commonality of
interest between the depository organizations. In making this determination,
the appropriate Federal supervisory
agency considers, among other things,
whether a person, including members
of his or her immediate family, whose
shares are necessary to constitute the
group owns a nominal percentage of
the shares of one of the organizations
and the percentage is substantially disproportionate to that person’s ownership of shares in the other organization.
(b) Area median income means:
(1) The median family income for the
metropolitan statistical area (MSA), if
a depository organization is located in
an MSA; or
(2) The statewide nonmetropolitan
median family income, if a depository
organization is located outside an
MSA.
(c) Community means a city, town, or
village, and contiguous or adjacent cities, towns, or villages.
(d) Contiguous or adjacent cities, towns,
or villages means cities, towns, or villages whose borders touch each other
or whose borders are within 10 road
miles of each other at their closest
points. The property line of an office
located in an unincorporated city,
town, or village is the boundary line of
that city, town, or village for the purpose of this definition.
(e) Depository holding company means
a bank holding company or a savings
and loan holding company (as more
fully defined in section 202 of the Interlocks Act (12 U.S.C. 3201)) having its
principal office located in the United
States.
(f) Depository institution means a commercial bank (including a private
bank), a savings bank, a trust company, a savings and loan association, a
building and loan association, a homestead association, a cooperative bank,
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.

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§ 711.3

12 CFR Ch. VII (1–1–16 Edition)

(g) Depository institution affiliate
means a depository institution that is
an affiliate of a depository organization.
(h) Depository organization means a
depository institution or a depository
holding company.
(i) District bank means any State
bank operating under the Code of Law
of the District of Columbia.
(j) Low and moderate-income areas
means census tracts (or, if an area is
not in a census tract, block numbering
areas delineated by the United States
Bureau of the Census) where the median family income is less than 100 percent of the area median income.
(k) Management official. (1) The term
management official means:
(i) A director;
(ii) An advisory or honorary director
of a depository institution with total
assets of $100 million or more;
(iii) A senior executive officer as that
term is defined in 12 CFR 701.14(b)(2), or
a person holding an equivalent position
regardless of title;
(iv) A branch manager;
(v) A trustee of a depository organization under the control of trustees;
and
(vi) Any person who has a representative or nominee serving in any of the
capacities in this paragraph (m)(1).
(2) The term management official does
not include:
(i) A person whose management functions relate exclusively to the business
of retail merchandising or manufacturing;
(ii) A person whose management
functions relate principally to the business outside the United States of a foreign commercial bank; or
(iii) A person described in the provisions of section 202(4) of the Interlocks
Act (12 U.S.C. 3201(4)) (referring to an
officer of a State-chartered savings
bank, cooperative bank, or trust company that neither makes real estate
mortgage loans nor accepts savings).
(l) Office means a principal or branch
office of a depository institution located in the United States. Office does
not include a representative office of a
foreign commercial bank, an electronic
terminal, or a loan production office.
(m) Person means a natural person,
corporation, or other business entity.

(n) Relevant metropolitan statistical
area (RMSA) means 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.
(o) Representative or nominee means a
natural person who serves as a management official and has an obligation to
act on behalf of another person with respect to management responsibilities.
NCUA will find that a person has an obligation to act on behalf of another
person only if the first person has an
agreement, express or implied, to act
on behalf of the second person with respect to management responsibilities.
NCUA will determine, after giving the
affected persons an opportunity to respond, whether a person is a representative or nominee.
(p) Total assets. (1) The term total assets means assets measured on a consolidated basis and reported in the
most recent fiscal year-end Consolidated Report of Condition and Income.
(2) The term total assets does not include:
(i) Assets of a diversified savings and
loan holding company as defined by
section 10(a)(1)(F) of the Home Owners’
Loan Act (12 U.S.C. 1467a(a)(1)(F))
other than the assets of its depository
institution affiliate;
(ii) Assets of a bank holding company
that is exempt from the prohibitions of
section 4 of the Bank Holding Company
Act of 1956 pursuant to an order issued
under section 4(d) of that Act (12 U.S.C.
1843(d)) other than the assets of its depository institution affiliate; or
(iii) Assets of offices of a foreign
commercial bank other than the assets
of its United States branch or agency.
(q) United States includes any State
or territory of the United States of
America, the District of Columbia,
Puerto Rico, Guam, American Samoa,
and the Virgin Islands.
[61 FR 50702, Sept. 27, 1996, as amended at 64
FR 66360, Nov. 26, 1999; 73 FR 30477, May 28,
2008; 75 FR 34621, June 18, 2010]

§ 711.3

Prohibitions.

(a) Community. A management official of a depository organization may

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National Credit Union Administration

§ 711.4

not serve at the same time as a management official of an unaffiliated depository organization if the depository
organizations in question (or a depository institution affiliate thereof) have
offices in the same community.
(b) RMSA. A management official of a
depository organization may not serve
at the same time as a management official of an unaffiliated depository organization if the depository organizations in question (or a depository institution affiliate thereof) have offices in
the same RMSA and each depository
organization has total assets of $50 million or more.
(c) Major assets. A management official of a depository organization with
total assets exceeding $2.5 billion (or
any affiliate thereof) may not serve at
the same time as a management official of an unaffiliated depository organization with total assets exceeding
$1.5 billion (or any affiliate thereof),
regardless of the location of the two
depository organizations. The NCUA
will adjust these thresholds, as necessary, based on year-to-year change in
the average of the Consumer Price
Index for the Urban Wage Earners and
Clerical Workers, not seasonally adjusted, with rounding to the nearest
$100 million. The NCUA will announce
the revised thresholds by publishing a
notice in the FEDERAL REGISTER.

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[61 FR 50702, Sept. 27, 1996, as amended at 64
FR 66360, Nov. 26, 1999; 72 FR 58249, Oct. 15,
2007]

§ 711.4 Interlocking relationships permitted by statute.
The prohibitions of § 711.3 do not
apply in the case of any one or more of
the following organizations or to a subsidiary thereof:
(a) A depository organization that
has been placed formally in liquidation, or which is in the hands of a receiver, conservator, or other official
exercising a similar function;
(b) A corporation operating under
section 25 or section 25A of the Federal
Reserve Act (12 U.S.C. 601 et seq. and 12
U.S.C. 611 et seq., respectively) (Edge
Corporations and Agreement Corporations);
(c) A credit union being served by a
management official of another credit
union;

(d) A depository organization that
does not do business within the United
States except as an incident to its activities outside the United States;
(e) A State-chartered savings and
loan guaranty corporation;
(f) A Federal Home Loan Bank or any
other bank organized solely to serve
depository institutions (a bankers’
bank) or solely for the purpose of providing securities clearing services and
services related thereto for depository
institutions and securities companies;
(g) A depository organization that is
closed or is in danger of closing as determined by the appropriate Federal
depository
institutions
regulatory
agency and is acquired by another depository organization. This exemption
lasts for five years, beginning on the
date the depository organization is acquired; and
(h)(1) A diversified savings and loan
holding company (as defined in section
10(a)(1)(F) of the Home Owners’ Loan
Act (12 U.S.C. 1467a(a)(1)(F)) with respect to the service of a director of
such company who also is a director of
an unaffiliated depository organization
if:
(i) Both the diversified savings and
loan holding company and the unaffiliated depository organization notify
their appropriate Federal depository
institutions regulatory agency at least
60 days before the dual service is proposed to begin; and
(ii) The appropriate regulatory agency does not disapprove the dual service
before the end of the 60-day period.
(2) The NCUA Board or its designee
may disapprove a notice of proposed
service if it finds that:
(i) The service cannot be structured
or limited so as to preclude an anticompetitive effect in financial services
in any part of the United States;
(ii) The service would lead to substantial conflicts of interest or unsafe
or unsound practices; or
(iii) The notificant failed to furnish
all the information required by NCUA.
(3) The NCUA Board or its designee
may require that any interlock permitted under this paragraph (h) be terminated if a change in circumstances
occurs with respect to one of the
interlocked depository organizations
that would have provided a basis for

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§ 711.5

12 CFR Ch. VII (1–1–16 Edition)

disapproval of the interlock during the
notice period.
§ 711.5 Small market share exemption.
(a) Exemption. A management interlock that is prohibited by § 711.3(a) or
§ 711.3(b) is permissible, provided:
(1) The interlock is not prohibited by
§ 711.3(c); and
(2) The depository organizations (and
their depository institution affiliates)
hold, in the aggregate, no more than
20% of the deposits, in each RMSA or
community in which the depository organizations (or their depository institution affiliates) are located. The
amount of deposits will be determined
by reference to the most recent annual
Summary of Deposits published by the
FDIC. This information is available on
the Internet at http://www.fdic.gov.
(b) Confirmation and records. Each depository organization must maintain
records sufficient to support its determination of eligibility for the exemption under paragraph (a) of this section, and must reconfirm that determination on an annual basis.

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[64 FR 66360, Nov. 26, 1999]

§ 711.6 General exemption.
(a) Exemption. NCUA may, by agency
order issued following receipt of an application, exempt an interlock from
the prohibitions in § 711.3, if NCUA
finds that the interlock would not result in a monopoly or substantial lessening of competition, and would not
present other safety and soundness
concerns.
(b) Presumptions. In reviewing applications for an exemption under this
section, NCUA will apply a rebuttable
presumption that an interlock will not
result in a monopoly or substantial
lessening of competition if the depository organization seeking to add a
management official:
(1) Primarily serves, low- and moderate-income areas;
(2) Is controlled or managed by persons who are members of a minority
group or women;
(3) Is a depository institution that
has been chartered for less than two
years; or
(4) Is deemed to be in ‘‘troubled condition’’ as defined in § 701.14(b)(3) of
this chapter.

(c) Duration. Unless a shorter expiration period is provided in the NCUA approval, an exemption permitted by
paragraph (a) of this section may continue so long as it would not result in
a monopoly or substantial lessening of
competition, or be unsafe or unsound.
If the NCUA grants an interlock exemption in reliance upon a presumption under paragraph (b) of this section, the interlock may continue for
three years, unless otherwise provided
in the approval.
[64 FR 66360, Nov. 26, 1999]

§ 711.7

Change in circumstances.

(a) Termination. A management official shall terminate his or her service
if a change in circumstances causes the
service to become prohibited. A change
in circumstances may include, but is
not limited to, an increase in asset size
of an organization, a change in the delineation of the RMSA or community,
the establishment of an office, an increase in the aggregate deposits of the
depository organization, or an acquisition, merger, consolidation, or reorganization of the ownership structure of
a depository organization that causes a
previously permissible interlock to become prohibited.
(b) Transition period. A management
official described in paragraph (a) of
this section may continue to serve the
depository organization involved in the
interlock for 15 months following the
date of the change in circumstances.
NCUA may shorten this period under
appropriate circumstances.
[61 FR 50702, Sept. 27, 1996, as amended at 64
FR 66360, Nov. 26, 1999]

§ 711.8

Enforcement.

Except as provided in this section,
NCUA administers and enforces the
Interlocks Act with respect to federally insured credit unions, and may
refer any case of a prohibited interlocking relationship involving these
entities to the Attorney General of the
United States to enforce compliance
with the Interlocks Act and this part.

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