WASHINGTON -- The Office of the Comptroller of the Currency joins other bank regulators today in proposing a controversial rule that would make it easier for banks in the same area to share directors.
The OCC's proposal would weaken a 1978 antitrust law, the Depository Institution Management Interlocks Act. House Banking Committee Chairman Henry B. Gonzalez of Texas strongly objected to a companion rule the Federal Reserve Board proposed in February.
The proposed rule would amend the Interlocks Act by allowing certain management interlocks that would otherwise be prohibited. Specifically, the OCC's plan would permit interlocks between banks that together control only 20% of a region's total deposits.
Grandfather Clause Expires
The 1978 law prohibits shared management between competing financial institutions, but contained a grandfathering provision that allowed directors or officers that sat on more than one board when the law was passed to stay on both boards.
That exception expired last November, and regulators have been scrambling to decide whether to continue to allow such interlocks.
Legislation has been proposed that would extend that grandfathering provision for another five years. The regulators' proposal goes further by not only exempting current interlocks - most of which are held by aging directors - but by also allowing many future interlocks.
Gonzalez Writes to Fed
In his letter to Fed Chairman Alan Greenspan, Rep. Gonzalez said the proposed exceptions, "fly in the face of the purpose and intent of the Act."
OCC spokeswoman Lenora Cross said, "We do not want to do anything that is counter to the intent of the law."
The text of the agency's rule reads, "This proposal recognizes that two depository institutions with a small proportion of the market they serve are no capable of exerting sufficient market influence to materially restrict the terms and availability of credit in their market."
Ms. Cross said the OCC is aware of Rep. Gonzalez' concerns, but, "wanted to take a look at what kinds of comments we received" to help judge the rule's effect.
Threshold Around $1 Billion
Jonathan L. Fiechter, acting director of the Office of Thrift Supervision, said that under the new rule, few interlocks would be prohibited in banks with less than $1 billion in assets.
"It in essence removes the prohibition, except for the very large institutions," Mr. Fiechter said. He urged agencies to disclose the proposal's full effect before enacting it, but he does not necessarily oppose it.
In his March 30 letter to Mr. Greenspan, Rep. Gonzalez warned, "Given the consolidation trend in the banking industry and concerns about credit availability, the prohibition of interlocks is probably more important than ever before."
Rep. Gonzalez warned the OCC in a March 30 letter, "I am greatly concerned about these attempts to vitiate the prohibitions and benefits of the Act." He sent similar letters to the OTS, the National Credit Union Administration, and the Federal Deposit Insurance Corp.
