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

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

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

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

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

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

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

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

§ 348.4 Permitted interlocking relationships.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

§ 348.3, a person who serves as a management official of a depository organization and of a nondepository organization (or any subsidiary thereof) is not prohibited from continuing the

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

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

§ 348.5 Grandfathered interlocking relationships.

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

[48 FR 5534, Feb. 7, 1983]

§ 348.6 Changes in circumstances.

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

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

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

349.3 Reports by executive officers and principal shareholders.

349.4 Disclosure of indebtedness of execu

tive officers and principal shareholders.

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

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

§ 349.1 Purpose and scope.

Section 106(b)(2) of the Bank Holding Company Act Amendments of 1970 (12 U.S.C. 1972(2)) ("BHCA Amendments") prohibits (1) preferential lending by a bank to executive officers, directors, and principal shareholders of another bank when there is a correspondent account relationship between the banks, or (2) the opening of a correspondent account relationship between banks when there is a preferential extension of credit by one of the banks to an executive officer, director, or principal shareholder of the other bank. Section 106(b)(2) also imposes requirements on executive officers and principal shareholders to submit reports on their indebtedness to correspondent banks to the board of directors of their bank. Section 7(k) of the Federal Deposit Insurance Act (12 U.S.C. 1817(k)) and section 106(b)(2)(G)(ii) of the BHCA Amendments (12 U.S.C. 1972(2)(G)(ii)) authorize the Federal banking agencies to issue rules and regulations, including definitions of terms, to require the reporting and public disclosure of information by a bank or an executive officer or principal shareholder thereof concerning extensions of credit by the bank or its correspondent banks to any of the reporting bank's executive officers or principal shareholders, or the related interests of such persons. This Part 349 implements the authorization of the latter sections to require such reporting and disclosure by insured State nonmember banks and their executive officers and principal shareholders.

For the purposes of the reporting and disclosure requirements of this Part 349, the following definitions apply:

(a) "Bank" has the meanings provided in (1) 12 U.S.C. 1841(c), and includes a branch or agency of a foreign bank, or a commercial lending company controlled by a foreign bank or by a company that controls a foreign bank, where the branch or agency is maintained in a State of the United States or in the District of Columbia or the commercial lending company is organized under State law, and (2) 12

U.S.C. 1972(2)(H)(i). Notwithstanding the foregoing, with respect to disclosures made pursuant to paragraph (a)(1) of § 349.4 and with respect to copies of requests maintained pursuant to paragraph (c) of § 349.4, "bank" shall mean "State nonmember bank" as defined in 12 U.S.C. 1813(b), including a "mutual savings bank" as defined in 12 U.S.C. 1813(f).

(b) "Capital stock and unimpaired surplus" shall have the meaning provided in § 215.2(f) of Federal Reserve Board Regulation O, Subpart A (12 CFR 215.2(f)). Notwithstanding the foregoing, with respect to "mutual savings banks," the term "total equity capital" found in 12 CFR 215.2(f) shall mean "total surplus accounts."

(c) "Company," "control of a company or bank," "executive officer," "extension of credit," "immediate family," and "person" have the meanings provided in §§ 215.2 and 215.3 of Subpart A of Federal Reserve Board Regulation O (12 CFR 215.2 and 215.3). All references to the term "member bank" in §§ 215.2 and 215.3 shall be deemed to refer to an insured State nonmember bank for the purposes of this Part 349.

(d) "Correspondent account" is an account that is maintained by an insured State nonmember bank with another bank for the deposit or placement of funds. A correspondent account does not include:

(1) Time deposits at prevailing market rates; or

(2) An account maintained in the ordinary course of business solely for the purpose of effecting Federal funds transactions at prevailing market rates or making Eurodollar placements at prevailing market rates.

(e) "Correspondent bank" means a bank that maintains one or more correspondent accounts for an insured State nonmember bank during a calendar year that in the aggregate exceed

1 For the purposes of this Part 349, executive officers of an insured State nonmember bank do not include an executive officer of a bank holding company of which such bank is a subsidiary or of any other subsidiary of the bank holding company, unless the executive officer is also an executive officer of the insured State nonmember bank.

an average daily balance during that year of $100,000 or one-half of one percent of the insured State nonmember bank's total deposits (as reported in its first Consolidated Report of Condition during that calendar year), whichever amount is smaller.

(f) "Indebtedness" means an extension of credit, but does not include:

(1) Commercial paper, bonds, debentures and other types of marketable securities issued in the ordinary course of business; or

(2) Consumer credit (as defined in 12 CFR 226.2(p)), in an aggregate amount of $5,000 or less from each of the insured State nonmember bank's correspondent banks, provided the indebtedness is incurred under terms that are not more favorable than those offered to the general public.

(g) "Maximum amount of indebtedness" means, at the option of the reporting person, either (1) the highest outstanding indebtedness during the calendar year for which the report is made, or (2) the highest end of the month indebtedness outstanding during the calendar year for which the report is made.

(h) For the purpose of this Part 349, "principal shareholder" and "related interest" have the meanings provided

in § 215.10(a) of Federal Reserve Board Regulation O, Subpart A (12 CFR 215.10(a)), except that the term "principal shareholder" is synonymous with the term "stockholder of record" as that term is used in the reporting provisions of 12 U.S.C. 1972(2)(G)(i). All references to the term "member bank" in § 215.10(a) shall be deemed to refer to an insured State nonmember bank for the purposes of this Part 349.

§ 349.3 Reports by executive officers and principal shareholders.

(a) Annual report. If during any calendar year an executive officer or principal shareholder of an insured State nonmember bank or a related interest of such a person has outstanding an extension of credit from a correspondent bank, the executive officer or principal shareholder must make a written report to the board of directors of the insured State nonmember

bank on or before January 31 of the following year.2

(b) Contents of report. The report required by this section shall include the following information:

(1) The maximum amount of indebtedness of the executive officer or principal shareholder and of each of that person's related interests to each of the insured State nonmember bank's correspondent banks during the calendar year; and

(2) The amount of indebtedness of the executive officer or principal shareholder and of each of that person's related interests outstanding to each of the insured State nonmember bank's correspondent banks not more than ten business days before the report required by this section is filed; 3 and

(3) A description of the terms and conditions (including the range of interest rates, the original amount and date, maturity date, payment terms, security, if any, and any other unusual terms or conditions) of each extension of credit included in the indebtedness reported under paragraph (b)(1) of this section.

(c) Retention of reports. The reports required by this section must ordinarily be retained at the insured State nonmember bank for a period of three years, but the Federal Deposit Insurance Corporation may require that they be retained by the bank for an additional period of time. The reports filed under this section are not required by this regulation to be made available to the public and shall not be filed with the Federal Deposit Insurance Corporation unless specifically requested.

2 Persons reporting under this section are not required to include information on extensions of credit that are fully described in a report by a person they control or a person that controls them, provided they identify their relationship with such other person.

'If the amount of indebtedness outstanding to a correspondent bank ten days before the filing of the report is not available or cannot be readily ascertained, an estimate of the amount of indebtedness may be filed with the report, provided that the report is supplemented within the next 30 days with the actual amount of indebtedness.