Board of Governors of the Federal Reserve System

The federal banking agencies on Thursday invited public comment on a proposal to update rules restricting the ability of a director or other management official to serve at more than one depository institution or depository holding company. The proposed changes would provide relief for community banks and better align with other rules.

The current management interlock rules prohibit a director or other management official working at a depository organization--a term defined by regulation to mean either a depository institution or a depository holding company--with more than $2.5 billion in total assets from serving at the same time at an unaffiliated depository organization with more than $1.5 billion in total assets. The current thresholds were established by statutory amendment in 1996. The proposal seeks comment on raising both thresholds to $10 billion in total assets, given the consolidation and growth in the industry over the past 20 years.

Management officials would generally remain prohibited from serving with multiple depository organizations that are above the new thresholds, limiting the potential risk of anticompetitive conduct at larger institutions. The agencies also invite public comment on other proposed approaches to raising the current thresholds.

The proposal responds to comments received during the recent review required by the Economic Growth and Regulatory Paperwork Reduction Act of 1996. It was jointly issued by the Federal Reserve Board, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency. Comments will be accepted for 60 days after publication in the Federal Register.