Regulators Monday proposed broader exemptions to a federal law prohibiting banks and thrifts from sharing top personnel.

Under the proposal, two institutions could share directors, senior executive officers, or branch managers so long as they controlled a combined 20% or less of the deposits in a market.

"The exemption is intended to enlarge the pool of management talent upon which depository institutions may draw, resulting in more competitive, better-managed institutions without causing significant anticompetitive effects," the proposed rule states.

Qualifying banks and thrifts would automatically be eligible to take advantage of the small-market-share exemption. But after exceeding the 20% threshold, they would have to stop sharing personnel.

Regulators also plan to raise the thresholds for asset-based exemptions. Currently, institutions are prohibited from sharing key personnel or officers if one bank's assets are above $1 billion and the other's exceeds $500 million.

Under the proposal, the levels would be raised to $2.5 billion and $1.5 billion, and would grow periodically with inflation. Institutions with assets above the new limits would not be eligible for the small-market- share exemption.

Comments on the plan are due Oct. 9.

The new exemption was part of a larger proposal by bank and thrift regulators to update the rules implementing the Depository Institution Management Interlocks Act, which has been amended several times in recent years. The law is meant to prevent unaffiliated institutions from conspiring to reduce market competition.

Under the proposal, bank and thrift regulators would have broader authority to issue exemptions, but banks would need to apply and make their case in writing.

Left unchanged would be regulators' current authority to exempt institutions that primarily serve lower-income areas, are controlled by women or minorities, have been chartered less than two years, or are undercapitalized.

Except for the small-market-share exception, banks and thrifts still must obtain regulators' approval for any of these exemptions and reapply every three years.

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