§ 652.20 - Eligible non-program investments.

§ 652.20 Eligible non-program investments.

Cross Reference

Link to an amendment published at 83 FR 55097, Nov. 2, 2018.

(a) You may hold only the types, quantities, and qualities of non-program investments listed in the following Non-Program Investment Eligibility Criteria Table. These investments must be denominated in United States dollars.

Non-Program Investment Eligibility Criteria Table

Asset class Final maturity limit NRSRO issue or issuer credit rating requirement Other requirements Maximum percentage of total non-program investment portfolio (1) Obligations of the United StatesNoneNANoneNone. • Treasuries • Other obligations (except mortgage securities) fully insured or guaranteed by the United States Government or a Government agency. (2) Obligations of Government-sponsored agenciesNoneNANoneNone. • Government-sponsored agency securities (except mortgage securities). • Other obligations (except mortgage securities) fully insured or guaranteed by Government-sponsored agencies. (3) Municipal Securities: • General obligations10 yearsOne of the two highestNoneNone. • Revenue bonds5 years for fixed rate bonds and 10 years for index/floating rate bondsHighestNone15%. (4) International and Multilateral Development Bank ObligationsNoneNoneThe United States must be a voting shareholderNone. (5) Money Market Instruments: • Federal funds1 day or continuously callable up to 100 daysOne of the two highest short-termNoneNone. • Negotiable certificates of deposit1 yearOne of the two highest short-termNoneNone. • Bankers acceptancesNoneOne of the two highest short-termIssued by a depository institutionNone. • Prime commercial paper270 daysHighest short-termNoneNone. • Non-callable term Federal funds and Eurodollar time deposits100 daysHighest short-termNone20%. • Master notes270 daysHighest short-termNone20%. • Repurchase agreements collateralized by eligible investments or marketable securities rated in the highest credit rating category by an NRSRO100 daysNANone. (6) Mortgage Securities: • Issued or guaranteed by the United States or a Government agencyNoneNANone. • Government-sponsored agency mortgage securitiesNoneOne of the two highest50%. • Non-Government agency or Government-sponsored agency securities that comply with 15 U.S.C. 77d(5) or 15 U.S.C.

Eligible investments consist of:

(1) A non-convertible senior debt security.

(2) A money market instrument with a maturity of 1 year or less.

(3) A portion of an ABS or MBS that is fully guaranteed by a U.S. Government agency.

(4) A portion of an ABS or MBS that is fully and explicitly guaranteed as to the timely payment of principal and interest by a GSE.

(5) The senior-most position of an ABS or MBS that is not fully guaranteed by a U.S. Government agency or fully and explicitly guaranteed as to the timely payment of principal and interest by a GSE, provided that the MBS satisfies the definition of “mortgage related security” in 15 U.S.C. 78c(a)(41)

NoneHighest15% combined

.

• Commercial mortgage-backed securitiesNoneHighest• Security must be backed by a minimum of 100 loans • Loans from a single mortgagor cannot exceed 5% of the pool. • Pool must be geographically diversified pursuant to the board's policy. (7) Asset-Backed Securities secured by: • Credit card receivables • Automobile loans • Home equity loans • Wholesale automobile dealer loans • Student loans • Equipment loans • Manufactured housing loansNoneHighestMaximum of 5-year WAL for fixed rate or floating rate ABS at their contractual interest rate caps25% combined. (8) Corporate Debt Securities5 yearsOne of the highest two for maturities greater than 3 years, and one of the highest three for maturities of three years or lessCannot be convertible to equity securities25%. (9) Diversified Investment Funds Shares of an investment company registered under section 8 of the Investment Company Act of 1940.NANAThe portfolio of the investment company must consist solely of eligible investments authorized by this section The investment company's risk and return objectives and use of derivatives must be consistent with FCA guidance and your investment policies.None, if your shares in each investment company comprise less than 10% of your portfolio. Otherwise counts toward limit for each type of investment.

Note: You must also comply with requirements of paragraphs (b), (c), and (d) of this section, and § 651.40 when applicable. “NA” means not applicable.

(b) Rating of foreign countries. Whenever the obligor or issuer of an eligible investment is located outside the United States, the host country must maintain the highest sovereign rating for political and economic stability by an NRSRO.

(c) Marketable investments. All eligible investments, except money market instruments, must be readily marketable. An eligible investment is marketable if you can sell it promptly at a price that closely reflects its fair value in an active and universally recognized secondary market. You must evaluate and document the size and liquidity of the secondary market for the investment at time of purchase.

(d) Obligor limits.

(1) You may not invest more than 25 percent of your regulatory capital in eligible investments issued by any single entity, issuer, or obligor. This obligor limit does not apply to Government-sponsored agencies or Government agencies. You may not invest more than 100 percent of your regulatory capital in any one Government-sponsored agency. There are no obligor limits for Government agencies.

(2) Obligor limits for your holdings in an investment company. You must count securities that you hold through an investment company toward the obligor limits of this section unless the investment company's holdings of the security of any one issuer do not exceed 5 percent of the investment company's total portfolio.

(e) Preferred stock and other investments approved by the FCA.

(1) You may purchase non-program investments in preferred stock issued by other Farm Credit System institutions only with our written prior approval. You may also purchase non-program investments other than those listed in the Non-Program Investment Eligibility Criteria Table at paragraph (a) of this section only with our written prior approval.

(2) Your request for our approval must explain the risk characteristics of the investment and your purpose and objectives for making the investment.

(6) An obligation of an international or multilateral development bank in which the U.S. is a voting member.

(7) Shares of a diversified investment fund, if its portfolio consists solely of securities that satisfy investments listed in paragraphs (b)(1) through (b)(3) of this section.

(b) Farmer Mac may only purchase those eligible investments satisfying all of the following:

(1) At a minimum, at least one obligor of the investment has a very strong capacity to meet financial commitments for the life of the investment, even under severely adverse or stressful conditions, and generally presents a very low risk of default. Investments whose obligors are located outside the U.S., and whose obligor capacity to meet financial commitments is being relied upon to satisfy this requirement, must also be fully guaranteed by a U.S. Government agency.

(2) The investment must exhibit low credit risk and other risk characteristics consistent with the purpose or purposes for which it is held.

(3) The investment must be denominated in U.S. dollars.

[83 FR 55097, Nov. 2, 2018]