Trust Co. and First National Bank are located in the same city and each has assets of over $20 million. The president of First National has been asked to serve as a director of Trust Co. First National has no trust department and no trust operations. Trust Co. operates solely as a trust company. Would this relationship violate the prohibitions against management official interlocks in Regulation L?
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A. B. C. D.A
The question refers to the provisions of Regulation L, which implements the Depository Institution Management Interlocks Act (DIMIA). The purpose of DIMIA and Regulation L is to prevent anti-competitive behavior and conflicts of interest that may arise when a management official serves on the board of directors of a competing financial institution.
In this case, Trust Co. and First National Bank are both financial institutions located in the same city and with assets of over $20 million. Therefore, there is a possibility that the relationship between the president of First National and Trust Co. may violate the prohibitions against management official interlocks under Regulation L.
However, the answer to the question depends on the specific provisions of Regulation L. According to Regulation L, an interlock is prohibited if:
In this case, we know that First National Bank is a depository institution with assets of over $20 million. However, Trust Co. is a trust company that operates solely as a trust institution and does not engage in depository activities. Therefore, the two institutions do not compete in the same line of business, and First National Bank does not have a trust department or trust operations that would compete with Trust Co.
Based on this analysis, the correct answer is C: No, the institutions do not compete, and therefore the relationship between the president of First National and Trust Co. would not violate the prohibitions against management official interlocks in Regulation L.