[Federal Register Volume 61, Number 246 (Friday, December 20, 1996)]
[Rules and Regulations]
[Pages 67181-67188]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-32309]
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FARM CREDIT ADMINISTRATION
12 CFR Parts 600, 603, 611, 614, 615, 618, and 619
RIN 3052-AB61
Organization and Functions; Privacy Act Regulations;
Organization; Loan Policies and Operations; Funding and Fiscal Affairs,
Loan Policies and Operations, and Funding Operations; General
Provisions; Definitions
AGENCY: Farm Credit Administration.
ACTION: Interim rule; request for comment.
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SUMMARY: The Farm Credit Administration (FCA or Agency) through the
Farm Credit Administration Board (Board) amends the current regulations
in parts 600, 603, 611, 614, 615, 618, and 619 to eliminate
unnecessary, outdated, duplicative, or burdensome regulatory
requirements, to replace outdated regulatory language with more current
terminology, and to clarify the intended meaning of certain regulatory
provisions. This is an interim rule, with request for comment, because
the changes cover issues that are primarily technical in nature.
DATES: The regulations shall be effective upon the expiration of 30
days after publication during which either or both houses of Congress
are in session. Written comments must be received on or before January
31, 1997. Notice of effective date will be published in the Federal
Register.
ADDRESSES: Comments may be mailed or delivered to Patricia W. DiMuzio,
Director, Regulation Development Division, Office of Policy Development
and Risk Control, Farm Credit Administration, 1501 Farm Credit Drive,
McLean, VA 22102-5090 or by facsimile at (703) 734-5784. Comments may
also be submitted via electronic mail to reg-comm@fca.gov''. Copies
of all communications received will be available for review by
interested parties in the Office of Policy Development and Risk
Control, Farm Credit Administration.
FOR FURTHER INFORMATION CONTACT:
Linda C. Sherman, Policy Analyst, Regulation Development Division,
Office of Policy Development and Risk Control, Farm Credit
Administration, McLean, VA 22102-5090, (703) 883-4498, TDD (703) 883-
4444.
or
Wendy R. Laguarda, Senior Attorney, Legal Counsel Division, Office of
General Counsel, Farm Credit Administration, McLean, VA 22102-5090,
(703) 883-4020, TDD (703) 883-4444.
SUPPLEMENTARY INFORMATION:
I. Basic Objectives for Interim Regulation
The FCA is continuing efforts to streamline its regulations as part
of its commitment to the principles contained in the Board's Policy
Statement on Regulatory Philosophy (Policy Statement). See 60 FR 26034
(May 16, 1995). Pursuant to the Policy Statement, the FCA will strive
to ensure that each regulation has a well-defined objective that
addresses specific problems or risks. The Policy Statement commits the
FCA to repeal regulations that prescribe detailed management and
operational practices for Farm Credit System (System) institutions and
that are not needed to enhance safe and sound bank operations. It is in
furtherance of these objectives that the Agency is making a number of
deletions, clarifications, and technical amendments to its regulations.
II. Background Information
As part of its ongoing efforts to streamline the regulatory
process, the Agency took the following initiatives to determine ways to
reduce regulatory burden:
A. The establishment of an FCA task force, pursuant to the Agency's
Strategic Action Plan, to eliminate nonstatutory prior approvals of
routine business matters;
B. A 1993 Solicitation for Public Comments concerning ways to
reduce regulatory burden (See 58 FR 34003, June 23, 1993);
C. The consideration of Regulatory Petitions submitted by the
public that recommended certain changes to existing regulations;
D. The establishment of an FCA task force on agricultural credit
bank (ACB) issues to evaluate the need for technical changes to
existing regulations in order to include ACBs; and
E. The consideration of FCA staff submissions containing
suggestions for regulatory deletions and amendments.
Substantive issues arising from such actions have been incorporated
into existing or new Agency regulatory projects. In order to provide
regulatory relief in the most expeditious manner possible, remaining
non-substantive and technical issues are addressed in this regulation.
III. Section-by-Section Analysis
1. 12 CFR 600.5 (Subpart A)--Farm Credit Administration
This section is amended to reflect the Agency's recent
organizational changes.
2. 12 CFR 603.310 (b)--Privacy Act Regulations
This section is amended to reflect the fact that the Privacy Act
Officer position has moved from the Office of Congressional and Public
Affairs to the Office of General Counsel.
3. 12 CFR 611.1135 (Subpart I)--Service Organizations
Section 611.1135(e) requires prior approval by the FCA for amending
the bylaws of service corporations. Section 4.25 of the Farm Credit Act
of 1971, as amended (Act) authorizes the FCA to charter service
corporations. However, section 5.17(b) of the Act provides that the FCA
shall not have the authority to approve bylaws, or amendments,
modifications or changes to bylaws, of System institutions. Further,
Sec. 4.26 of the Act no longer authorizes the FCA to approve bylaws of
service corporations. Thus, the FCA is deleting Sec. 611.1135(e) and
removing the FCA prior approval requirement for amendments to bylaws
for service corporations.
As part of the normal chartering application process, service
corporation bylaws will continue to be reviewed by the FCA. Such review
will be limited, however, to whether the bylaws violate any statutory,
regulatory or safety and soundness provisions.
Under the Farm Credit System Reform Act of 1996, Pub. L. 104-105,
110 Stat. 162, February 10, 1996, associations are authorized to form
service corporations. Technical changes to make Sec. 611.1135
consistent with the 1996 legislation have been incorporated into the
interim rule. This rule also replaces outdated language with more
current terminology. For example, the word ``Chairman'' is deleted, and
in its place the words ``Farm Credit Administration'' are inserted.
4. 12 CFR 611.1140 and 611.1145 (Subpart J)--Merger and Reorganization
Proposals Required by the Agricultural Credit Act of 1987
The FCA is deleting all of subpart J. These regulations were issued
to facilitate the consolidation of System institutions as required by
section 412 of the Agricultural Credit Act of 1987. All consolidations
were required to be completed by January 1, 1990. Hence, these
regulations, including the FCA
[[Page 67182]]
prior approval requirements in Secs. 611.1140(d) and 611.1145(c), have
become obsolete.
5. 12 CFR 611.1155, 611.1157, 611.1158, 611.1160, 611.1161, 611.1162,
611.1163, 611.1164, 611.1166, 611.1167, 611.1168, 611.1169, 611.1170,
611.1171, 611.1172, 611.1173, 611.1174, 611.1175, 611.1176, 611.1180,
611.1181, 611.1182, and 611.1183 (Subparts K, L, M and N)--Appointment
of Conservators and Receivers, Liquidation of Associations, Liquidation
of Banks, and Conservators and Conservatorships of Banks and
Associations
Subparts K through N address System conservatorships or
receiverships in which the identity of the conservator or receiver is
left to the discretion of the FCA. Pursuant to section 4.12 of the Act,
after January 5, 1993, the Farm Credit System Insurance Corporation
(FCSIC) is the sole entity that may be appointed by the FCA as receiver
or conservator for System institutions (except the Federal Agricultural
Mortgage Corporation) placed into conservatorship or receivership.
Future conservatorships or receiverships of System institutions are
governed by 12 CFR part 627. As there are no outstanding System
receiverships or conservatorships, the regulations in subparts K-N are
obsolete. An issue was raised regarding whether a System institution
may liquidate or dissolve through means other than a receivership. This
issue is substantive and will be addressed at a later date.
Finally, the FCA previously proposed changes to Secs. 611.1155 and
611.1157 pertaining to the definition of insolvency (See 53 FR 43897,
October 31, 1988). In this rulemaking, the FCA is deleting both these
sections and therefore withdrawing any outstanding proposals on these
regulations. Any remaining issues pertaining to the definition of
insolvency will be addressed in the Capital--Phase III (RIN 3052-AB58)
regulatory project.
6. 12 CFR 611.1190, 611.1191, 611.1192, 611.1193, 611.1194, 611.1195,
611.1196, 611.1197, 611.1198 (Subpart O)--Special Reconsideration of
Mergers
The regulations in subpart O implement the provisions of the
Agricultural Credit Act of 1987 relating to special reconsideration of
voluntary mergers and consolidations that occurred after December 23,
1985, and prior to January 6, 1988. System associations had 1 year,
until December 1989, to reconsider these mergers. As this regulation is
obsolete, the FCA is deleting all of subpart O.
7. 12 CFR 614.4321 (Subpart G)--Interest Rates and Charges
Section 614.4321 currently defines the types of interest rate
programs that may be utilized by System banks and associations. This
section also requires the FCA's prior approval of specific criteria for
differential interest rate programs.
The FCA has concluded that defining the types of interest rate
programs and requiring the FCA's prior approval are no longer
necessary. Also, the last sentence in Sec. 614.4321(d) is duplicative
of direction already found in the Other Financing Institutions
regulation at Sec. 614.4640. Accordingly, the FCA is deleting most of
this section. However, the section on differential interest rates is
being retained in order to set forth the requirement that System
institutions adhere to the principle of nondiscrimination among
similarly situated borrowers in setting differential interest rates.
8. 12 CFR 614.4444 (Subpart L)--Actions on Applications; Review of
Credit Decisions
The interim regulation eliminates all references to Special Asset
Groups and the National Special Assets Council, as these entities no
longer exist. The interim regulation also revises the last two
sentences of this paragraph to clarify that System institutions must
continue to retain sufficient documentation of their reasons not to
restructure a loan to permit the institution or an outside party, such
as the FCA, to review each determination. The FCA considers this change
to be technical in nature because this is not a new requirement. The
above change permits the review of a decision not to restructure a loan
to be conducted by a System institution or an outside party such as the
FCA, rather than by the defunct Special Asset Groups or the National
Special Asset Council.
9. 12 CFR 614.4510 (Subpart N)--Loan Servicing Requirements; State
Agricultural Loan Mediation Programs; Right of First Refusal
Section 614.4510 prescribes guidelines for bank and association
loan servicing activities. Specifically, paragraph (b) requires the
district bank to provide guidelines for establishing loan servicing
policies and procedures for associations. Paragraph (d)(4) of this
section requires System institutions to provide the FCA with any
revisions to loan servicing policies. Consistent with the FCA Board's
emphasis on holding direct lender associations responsible for their
lending activities, the Agency is deleting paragraphs (b) and (d)(4).
The funding bank's involvement in association loan servicing policies
will continue to be monitored through its direct loan and the general
financing agreement. Further, these policies will continue to be
reviewed as part of the normal examination process. The interim rule
also replaces outdated terminology to describe correctly the types of
System institutions to which this section applies.
10. 12 CFR 614.4515(b), 614.4516, 614.4517(c), and 614.4520 (Subpart
N)--Loan Servicing Requirements; State Agricultural Loan Mediation
Programs; Right of First Refusal
The interim rule eliminates Sec. 614.4515(a)(2), (b)(1) and (b)(2)
because they contain a statutory requirement relating to restructuring
policy and reporting that expired on January 6, 1993. The remainder of
Sec. 614.4515(a) is incorporated in the introductory paragraph of
Sec. 614.4516, retitled ``Restructuring policy and procedures.''
The FCA is adding a new paragraph (c), entitled ``Documentation,''
to Sec. 614.4517 regarding restructuring decisions. The new paragraph
clarifies that, when an application for restructuring is denied,
qualified lenders must maintain sufficient documentation to support
their decision. The documentation should demonstrate that the
institution considered all the applicable factors for determining
whether to restructure a loan, as set forth in paragraphs (a) and (b)
of this section.
In addition, the FCA is deleting all of Sec. 614.4520. The Farm
Credit System Assistance Board (Assistance Board) established the
National Special Asset Council in June 1988 to ensure that Federal
financial assistance to financially distressed farmers provided loan
restructuring measures as alternatives to foreclosure. The Assistance
Board's charter was canceled by the FCA Board, effective December 31,
1992, as required by Sec. 6.12 of the Act. The FCA Board also dissolved
the National Special Asset Council effective December 31, 1992. There
are no longer any ``certified'' institutions remaining in the System
today and, thus, this section is no longer necessary.
11. 12 CFR 614.4525(d) (Subpart O)--Special Lending Programs
The interim rule removes the requirement that System lenders obtain
the approval of their respective banks' board of directors prior to
entering into a memorandum of understanding with other lenders when
processing loans to
[[Page 67183]]
mutual borrowers. Consistent with the FCA Board's regulatory philosophy
of repealing regulations that prescribe needlessly detailed management
and operational practices, the FCA believes that it is reasonable for
System institutions to decide their own policies on these matters. This
rule also replaces outdated language with more current terminology.
12. 12 CFR 615.5140(a)(1) (Subpart E)--Investment Management
Currently Sec. 615.5140(a)(1) permits System banks to invest in
obligations that are both ``issued and guaranteed'' by agencies and
instrumentalities of the United States. The FCA intended to preclude
System banks from acquiring securities that are not guaranteed by
Federal agencies or instrumentalities. However, an unintended
consequence of Sec. 615.5140(a)(1) was to prohibit System banks from
investing in non-governmental obligations that are not issued, but are
guaranteed or insured, by a Federal agency or instrumentality.
For this reason, the FCA is amending Sec. 615.5140(a)(1) to include
the following as eligible investments: Obligations of the United
States; full-recourse obligations, other than mortgage-backed
securities, of agencies, instrumentalities or corporations of the
United States; or debt obligations of other obligers that are fully
insured or guaranteed as to both principal and interest by the United
States, its agencies, instrumentalities, or corporations. This
amendment will provide System banks with the flexibility they need to
achieve the investment objectives specified in Sec. 615.5132.
13. 12 CFR 615.5250 (Subpart I)--Issuance of Equities
Section 615.5250 requires System banks and associations to disclose
certain information to purchasers of an institution's equities. An
exception in Sec. 615.5250(e) relieves System institutions from making
disclosures to ``other financing institutions having a discount or
lending relationship with the selling Farm Credit System
institutions.'' This regulation was intended to grant System
institutions relief from disclosing equity information to sophisticated
or institutional investors in System equities. System institutions have
inquired whether the exemption in Sec. 615.5250(e) applies to those
non-System lenders that purchase System equities as part of a loan
participation transaction. In response to these inquiries, the FCA is
clarifying Sec. 615.5250(e) by including ``other financing
institutions'' as defined in Sec. 1.7(b) of the Act, as well as other
System institutions and non-System lenders. The interim rule is
consistent with the FCA's approach concerning disclosures to
shareholders because the disclosure requirements in Sec. 615.5250 are
not necessary for financial institutions and other sophisticated
investors. This clarification also eliminates an unnecessary regulatory
burden on the System and facilitates loan participation arrangements
between System institutions and non-System institutions.
14. 12 CFR 618.8260 (Subpart F)--Miscellaneous Provisions
This section sets forth procedures by which System banks may
purchase automobiles through the General Services Administration (GSA).
This regulation is rarely used and contains an unnecessary prior
approval in Sec. 618.8260(b).
The authority for System banks to make such purchases exists
whether or not it is specified in an FCA regulation. Accordingly, the
Agency is deleting all of Sec. 618.8260. System banks that desire
guidance on how to proceed may contact the GSA directly, or may request
additional information from the FCA's Contracting and Procurement
Branch.
15. 12 CFR 618.8310(b) (Subpart G)--Releasing Information
In connection with the regulatory burden project (See 58 FR 34003,
June 23, 1993), an association submitted comments to the FCA concerning
the provisions of Sec. 618.8310(b). This regulation prescribes
circumstances under which a System institution can release lists of its
stockholders. The association expressed a concern that the regulation
imposed an undue burden on System institutions in determining what
constitutes a ``permissible purpose'' and whether System institutions
can enforce the regulatory provision after releasing a stockholder
list. It is neither feasible nor advisable to amend this section to
provide a comprehensive list of every permissible purpose for
requesting and using a stockholder list. The Agency will provide
additional interpretive guidance directly to the concerned association
and to any other interested parties.
The interim rule also replaces outdated language with more current
terminology.
16. 12 CFR 618.8320 (Subpart G)--Releasing Information
The existing regulation prohibits System institutions from
releasing information regarding borrowers and loan applicants except in
specified circumstances. The FCA received a letter from a System bank
requesting clarification on whether releasing borrower information to
credit bureaus was permitted by this regulation, as the ``reliable
organization'' exception in Sec. 618.8320(b)(5) does not make this
clear.
The FCA believes that credit bureaus should be among the types of
reliable organizations contemplated by this regulation. To make this
clear, the interim rule amends Sec. 618.8320(b)(5) by expressly
authorizing System institutions to provide borrower information to
consumer reporting agencies.
Section 618.8320(b)(2) permits System institutions to provide
borrower data to specified Federal agencies in connection with official
investigations. The list in the regulation is outdated and restrictive.
To facilitate communications between the System and Federal law
enforcement authorities investigating possible borrower misconduct,
Sec. 618.8320(b)(2) has been modified to replace the list of Federal
agencies with a generic reference to all Federal agencies with a
legitimate law enforcement inquiry.
Finally, a technical change was made to delete Sec. 618.8320(b)(9)
because it refers to the National Special Asset Council, an entity
which no longer exists.
17. 12 CFR 618.8330 and 618.8340 (Subpart G)--Releasing Information
During the regulatory burden project (See 58 FR 34003, June 23,
1993), the FCA received two letters from System institutions requesting
clarification of the legal circumstances under which System institution
personnel could be summoned as witnesses. Their first concern was that
requiring System personnel to formally inform the court of the FCA's
regulations was burdensome. After reviewing the issue the Agency has
determined that, contrary to being a burden, this regulation provides
System directors, officers or employees with a means to resist
complying with a subpoena that requests the disclosure of confidential
information in violation of FCA regulations, except as ordered by a
court of law. Their second concern pertains to the requirements of
Sec. 618.8330(b) to consult with an attorney at their funding bank when
System personnel are summoned as a witness. The Agency agrees that this
requirement is burdensome and unnecessary. Consistent with the FCA
Board's regulatory philosophy of repealing regulations that prescribe
needlessly detailed management and operational
[[Page 67184]]
practices, the FCA is deleting Sec. 618.8330(b).
Upon review of the regulation at Sec. 618.8340, which requires the
approval of the supervising funding bank before releasing lists of bank
and association employees, the FCA has determined to delete it in its
entirety. Consistent with the FCA Board's regulatory philosophy, the
FCA believes that it is reasonable for System institutions to decide
their own policies on these matters.
18. 12 CFR 618.8360 and 618.8370 (Subpart H)--Disposition of Obsolete
Records
This subpart currently requires System institutions to maintain
records indefinitely and to maintain an ``up-to-date records disposal
schedule.'' Consistent with the FCA Board's regulatory philosophy of
repealing regulations that prescribe unnecessarily detailed management
and operational practices, the FCA is proposing to delete this subpart,
including the list of appropriate records retention practices in the
current Sec. 618.8360. The FCA believes that System institutions have
the discretion to dispose of any records that are not required for
research, legal, audit or examination purposes. In accordance with good
business practices, records retention policies should be set forth in
written procedures approved by an institution's board.
The FCA may issue further guidance (such as in a bookletter or
examination manual) regarding what records System institutions should
retain so that they may be adequately examined for safety and soundness
purposes.
Section 618.8360(a)(3) requires System institutions to retain basic
personnel records, including personnel folders, service records, cards,
and earning records for all active and former employees covered under
the Civil Service Retirement Act (CSRA). These records were necessary
to ensure that employees eligible for Civil Service retirement received
appropriate benefits. The FCA is deleting this requirement because our
research indicates that there are only three remaining System employees
eligible for CSRA benefits, and their personnel offices are aware of
the appropriate Office of Personnel Management requirements.
Finally, Sec. 618.8360(a)(6) currently requires System institutions
to keep financial reports as of June 30 and December 31 of each year.
Although the FCA is deleting Sec. 618.8360(a)(6), the call report
instructions will continue to require System institutions to keep such
financial reports.
19. 12 CFR 618.8380, 618.8390, 618.8400, 618.8410, and 618.8420
(Subpart I)--Federal Records
This subpart pertains to the maintenance and disposal of Federal
records. The Federal records held by the System institutions are the
property of the Federal government rather than the property of the
System or the FCA. These records must be handled in accordance with the
laws and regulations governing all Federal records, and there are
penalties attached to the unauthorized disposal of Federal records. The
National Archives and Records Administration is the Federal agency
responsible for promulgating rules and regulations on the management
and disposal of Federal records.
Although no new Federal records are being created in the System
today, some System institutions may still be in possession of Federal
records as described in current Sec. 618.8390. Because most of these
records would be over 40 years old, the FCA assumes that their number
is limited and that most, if not all, could be destroyed or archived.
The FCA believes that future guidance on their maintenance and
disposition is more appropriately the subject of a bookletter.
Therefore, the Agency is deleting all of subpart I. The FCA requests
that any System institution with records as described in Sec. 618.8390
notify the Agency during the comment period of the types of Federal
records in their possession. The goal is to identify all Federal
records still retained by System institutions so that they can either
be destroyed (at the institution's discretion) or archived, as
appropriate.
IV. Agricultural Credit Banks
In 1987, the Act was amended to allow the System to form
agricultural credit banks (ACBs). An ACB is formed by the merger of a
Farm Credit Bank (FCB) and a bank for cooperatives (BC). Pursuant to
section 7.2 of the Act, an ACB is granted all of the powers of its
constituent FCB and BC. The FCA reviewed its regulations to determine
whether or not technical changes were needed to adapt the rules to
ACBs. The ACB review highlighted the need for technical amendments to
the regulations. Set forth below is a discussion of issues involving
ACBs that are technical in nature. A complete listing of the technical
edits can be found in the amendatory language following the preamble.
A. Definition of Bank for Cooperatives
Currently, the definition of a bank for cooperatives in
Sec. 619.9060 reads as follows, ``Banks operating under title III of
the Act, including the National Bank for Cooperatives, individual and
regional banks for cooperatives and agricultural credit banks.'' There
is a separate definition of ACBs in Sec. 619.9020 that reads as
follows, ``Agricultural credit banks are those banks created by the
merger of a Farm Credit Bank and a bank for cooperatives pursuant to
section 7.0 of the Act.'' The current definition of a BC serves to
ensure that an ACB is subject to the same constraints as a BC on its
title III lending authorities. However, this BC definition is
insufficient because it does not address the title I authorities of an
ACB. As currently written, Sec. 619.9060 has the effect of excluding
ACBs from various regulatory provisions. For example, BCs are not
subject to the regulations relating to borrower rights, loan
disclosures, and secondary market activities.
For all the foregoing reasons, the FCA is keeping the definitions
of an ACB and a BC separate by revising the definition of BC to read as
follows, ``A bank for cooperatives is a bank that is operating under
section 3.0 of the Act.'' The definition of an ACB will continue to
read as currently set forth in Sec. 619.9020. The definition of a BC
also strikes the obsolete reference to the National Bank for
Cooperatives, whose charter was canceled in 1994, when CoBank and the
Springfield FCB and BC merged to create CoBank, ACB.
B. Borrower Rights
When the FCA approved the formation of the first ACB in 1994, it
addressed the issue of whether borrower rights provisions would apply
to the new entity. In approving the new charter, the FCA confirmed that
the ACB would not be subject to the borrower rights provisions of title
IV, part C of the Act, except to the extent that it lends to farmers,
ranchers, and producers and harvesters of aquatic products. Thus, the
FCA concluded that the borrower rights provisions attach to all loans
made under an ACB's title I lending authorities.
Many of the current regulations pertaining to borrower rights
exclude a BC from the definition of ``qualified lender.'' By revising
the definition of a BC as discussed above, ACBs would now be included
in the definition of ``qualified lender'' to the extent of their title
I lending authorities. Therefore, no additional regulatory language
changes have been made to the borrower rights
[[Page 67185]]
provisions, except for technical corrections in Secs. 614.4440(h)(1)
and 614.4510, in which outdated language is replaced by more current
terminology.
C. Termination of Farm Credit Status
Several technical changes have been made to the regulatory
provisions pertaining to the termination of Farm Credit status at
Secs. 611.1200(c), 611.1250(b) and (c), 611.1255, 611.1266(c). These
changes include adding the phrase ``or agricultural credit bank'' and
deleting or replacing outdated language with more current terminology,
where necessary.
D. Miscellaneous Technical Changes
Several technical changes have been made to various regulatory
provisions at Secs. 615.5120(a), 615.5143, 615.5280, 615.5290(a),
618.8310(b)(1) and 618.8325(c). These changes include adding the phrase
``or agricultural credit bank'' and deleting or replacing outdated
language with more current terminology, as appropriate.
List of Subjects
12 CFR Part 600
Organization and functions (Government agencies).
12 CFR Part 603
Privacy.
12 CFR Part 611
Agriculture, Banks, banking, Rural areas.
12 CFR Part 614
Agriculture, Banks, banking, Foreign trade, Reporting and
recordkeeping requirements, Rural areas.
12 CFR Part 615
Accounting, Agriculture, Banks, banking, Government securities,
Investments, Rural areas.
12 CFR Part 618
Agriculture, Archives and records, Banks, banking, Insurance,
Reporting and recordkeeping requirements, Rural areas, Technical
assistance.
12 CFR Part 619
Agriculture, Banks, banking, Rural areas.
For the reasons stated in the preamble, parts 600, 603, 611, 614,
615, 618, and 619 of chapter VI, title 12 of the Code of Federal
Regulations, are amended to read as follows:
PART 600--ORGANIZATION AND FUNCTIONS
1. The authority citation for part 600 is revised to read as
follows:
Authority: Secs. 5.7, 5.8, 5.9, 5.10, 5.11, 5.17, 8.11 of the
Farm Credit Act (12 U.S.C. 2241, 2242, 2243, 2244, 2245, 2252,
2279aa-11).
Subpart A--Farm Credit Administration
2. Section 600.5 is amended by removing the words ``Special
Supervision and Corporate Affairs'' and adding in their place the words
``Policy Development and Risk Control'' in the fourth sentence of
paragraph (b); removing the words ``coordinates the agency's
preparation of rules and regulations;'' in the first sentence of
paragraph (d)(1); and by revising paragraph (d)(2) to read as follows:
Sec. 600.5 Organization of the Farm Credit Administration.
* * * * *
(d) * * *
(2) Office of Policy Development and Risk Control.
The Office of Policy Development and Risk Control (OPDRC) develops
policies and regulations for the FCA Board's consideration and promotes
risk management policies and practices by the Farm Credit System. The
OPDRC has primary responsibility for developing regulatory proposals
and public policy statements that effectively implement applicable
statutes and promote the safety and soundness of the System. Other
major functions include evaluating requests for regulatory and charter
approvals and managing the FCA's corporate activities; ensuring that
risks associated with chartering activities are properly disclosed to
System shareholders and the FCA Board; managing the FCA's formal
enforcement activities and providing economic and financial analyses
that identify risk and contribute to the effective management of such
risks. The OPDRC also facilitates the FCA's strategic planning
function.
* * * * *
PART 603--PRIVACY ACT REGULATIONS
3. The authority citation for part 603 is revised to read as
follows:
Authority: Secs. 5.9, 5.17 of the Farm Credit Act (12 U.S.C.
2243, 2252); 5 U.S.C. app. 3, 5 U.S.C. 552a (j)(2) and (k)(2).
Sec. 603.310 [Amended]
4. Section 603.310 is amended by removing the words ``Congressional
and Public Affairs'' and adding in their place the words ``General
Counsel'' in paragraph (b).
PART 611--ORGANIZATION
5. The authority citation for part 611 continues to read as
follows:
Authority: Secs. 1.3, 1.13, 2.0, 2.10, 3.0, 3.21, 4.12, 4.15,
4.21, 5.9, 5.10, 5.17, 7.0-7.13, 8.5(e) of the Farm Credit Act (12
U.S.C. 2011, 2021, 2071, 2091, 2121, 2142, 2183, 2203, 2209, 2243,
2244, 2252, 2279a-2279f-1, 2279aa-5(e)); secs. 411 and 412 of Pub.
L. 100-233, 101 Stat. 1568, 1638; secs. 409 and 414 of Pub. L. 100-
399, 102 Stat. 989, 1003, and 1004.
Subpart F--Bank Mergers, Consolidations and Charter Amendments
Sec. 611.1030 [Amended]
6. Section 611.1030 is amended by removing the words ``Agricultural
Credit Bank'' and adding in their place, the words ``agricultural
credit bank'' in the heading and the first sentence.
Subpart I--Service Organizations
7. Section 611.1135 is amended by removing paragraph (e) and
revising paragraphs (a), (b)(1), (b)(2), (b)(3)(v), (b)(6), (b)(7),
(c), (d)(1) introductory text, (d)(1)(iv), and (d)(2) to read as
follows:
Sec. 611.1135 Incorporation of service organizations.
(a) General. Any Farm Credit bank(s) or association(s) may organize
a corporation to perform, for or on behalf of the bank(s) or
association(s), any function or service that the bank(s) or
association(s) is authorized to perform under the Act and the
regulations, except extending credit and providing the sale of
insurance services. The bank(s) or association(s) wishing to organize
such a corporation shall submit an application to the Farm Credit
Administration according to the application requirements of paragraph
(b) of this section. If the proposal meets the requirements of the Act,
the regulations, and any other conditions that the Farm Credit
Administration may impose, the Agency may issue a charter for the
service corporation making it a federally chartered instrumentality of
the United States. Such service corporation shall be subject to
examination, supervision, and regulation by the Farm Credit
Administration. Only Farm Credit banks or associations are eligible to
become stockholders in such a corporation. Each bank or association
shall be eligible to become a stockholder of each service corporation
organized under this section.
(b) * * *
(1) The certified resolution of the board of each organizating bank
or
[[Page 67186]]
association authorizing the incorporation.
(2) A request signed by the president(s) of the organizing bank(s)
or association(s) to the Farm Credit Administration to issue a charter,
supported by a detailed statement demonstrating the need and the
justification for the proposed entity.
(3) * * *
(v) The procedures under which a bank or association may become a
stockholder;
* * * * *
(6) Any agreements between the organizing banks or associations
relating to the organization or the operation of the corporation.
(7) Any other supporting documentation as may be requested by the
Farm Credit Administration.
(c) Approval. The Farm Credit Administration may condition the
issuance of a charter as it deems appropriate and for good cause may
deny the application. Upon approval by the Farm Credit Administration
of a completed application, which shall be kept on file at the Farm
Credit Administration, the Agency shall issue a charter for the service
corporation which shall thereupon become a corporate body and a Federal
instrumentality.
(d) * * *
(1) The board of directors of the corporation may request that the
Farm Credit Administration amend the articles of incorporation by
sending with its request a certified resolution of the board of
directors of the service corporation and stating:
* * * * *
(iv) That the requisite shareholder approval has been obtained. The
request shall be subject to the approval of the Farm Credit
Administration as stated in paragraphs (a) and (c) of this section.
(2) The Farm Credit Administration may at any time make any and all
changes in the articles of incorporation of a service corporation that
are necessary and appropriate for the accomplishment of the purposes of
the Act.
Subparts J, K, L, M, N, and O [Reserved]
8. Subparts J, K, L, M, N, and O of part 611 are removed and
reserved.
Subpart P--Termination of Farm Credit Status--Associations
Sec. 611.1200 [Amended]
9. Section 611.1200 is amended by adding the words ``or
agricultural credit bank'' after the words ``Farm Credit Bank'' each
place they appear in paragraph (c).
Sec. 611.1250 [Amended]
10. Section 611.1250 is amended by adding the words ``or
agricultural credit bank'' after the words ``Farm Credit Bank'' in the
first sentence of paragraph (b) and in the first and third place they
appear in paragraph (c); and by removing the words ``Farm Credit Bank''
the second place they appear and adding in their place the words
``appropriate bank'' in the first sentence of paragraph (c).
11. Section 611.1255 is revised to read as follows:
Sec. 611.1255 Retirement of equities owned.
(a) The Farm Credit Bank or agricultural credit bank may retire all
equities of the bank that are owned by the terminating association on
the termination date or may enter into an agreement with the
terminating association that would provide for a phased retirement of
the equities. Any such plan for phased retirement shall provide for
such retirement to be completed by the earlier to occur of the date on
which the terminating association repays all indebtedness to the bank
or the date that is 3 years from the termination date, provided that no
retirement shall occur during that period if any such retirement would
result in the Bank's failure to meet minimum capital requirements.
(b) If the Farm Credit Bank or agricultural credit bank, and the
terminating association are unable to reach agreement regarding the
retirement of the bank's equities, either institution may send the most
recent proposals to the Farm Credit Administration along with an
explanation of the points of disagreement. The Farm Credit
Administration may require the bank to retire terminating association
equities under such conditions as the Farm Credit Administration may
require.
(c) No retirement shall occur if the Farm Credit Administration
determines that the retirement of equities of the Farm Credit Bank or
the agricultural credit bank would threaten the viability of the bank.
(d) The amount to be paid to a terminating association in the
retirement of equities owned in the Farm Credit Bank or the
agricultural credit bank shall be equal to the amount of the allocated
equities owned by the terminating association in the bank, less any
impairment, at the date the request for retirement is made by the
terminating association.
(e) If the terminating association has outstanding stock issued to
another Farm Credit institution, the association shall retire all such
investment prior to termination.
(f) A Farm Credit Bank's or agricultural credit bank's equities
obligated to be retired under any agreement between the terminating
association and the bank shall not be considered as part of the
permanent capital of the Farm Credit Bank or agricultural credit bank
for purposes of Sec. 615.5240.
Sec. 611.1266 [Amended]
12. Section 611.1266 is amended by removing the words ``district
Farm Credit Bank'' and adding in their place the words ``funding bank''
in the last sentence of paragraph (c).
PART 614--LOAN POLICIES AND OPERATIONS
13. The authority citation for part 614 continues to read as
follows:
Authority: 42 U.S.C. 4012a, 4014a, 4104b, 4106, and 4128; secs.
1.3, 1.5, 1.6, 1.7, 1.9, 1.10, 2.0, 2.2, 2.3, 2.4, 2.10, 2.12, 2.13,
2.15, 3.0, 3.1, 3.3, 3.7, 3.8, 3.10, 3.20, 3.28, 4.12, 4.12A, 4.13,
4.13B, 4.14, 4.14A, 4.14C, 4.14D, 4.14E, 4.18, 4.19, 4.36, 4.37,
5.9, 5.10, 5.17, 7.0, 7.2, 7.6, 7.7, 7.8, 7.12, 7.13, 8.0, 8.5 of
the Farm Credit Act (12 U.S.C. 2011, 2013, 2014, 2015, 2017, 2018,
2071, 2073, 2074, 2075, 2091, 2093, 2094, 2096, 2121, 2122, 2124,
2128, 2129, 2131, 2141, 2149, 2183, 2184, 2199, 2201, 2202, 2202a,
2202c, 2202d, 2202e, 2206, 2207, 2219a, 2219b, 2243, 2244, 2252,
2279a, 2279a-2, 2279b, 2279b-1, 2279b-2, 2279f, 2279f-1, 2279aa,
2279aa-5); sec. 413 of Pub. L. 100-233, 101 Stat. 1568, 1639; sec.
207 of Pub. L. 104-105, 110 Stat. 162.
Subpart G--Interest Rates and Charges
14. Section 614.4321 is revised to read as follows:
Sec. 614.4321 Differential interest rate programs.
Pursuant to policies approved by the board of directors,
differential interest rates may be established for loans based on a
variety of factors that may include type, purpose, amount, quality,
funding or operating costs, or similar factors or combinations of
factors. Differential interest rate programs should achieve equitable
rate treatment within categories of borrowers. In the adoption of
differential interest rate programs, institutions may consider, among
other things, the effect that such interest rate structures will have
on the achievement of objectives relating to the special credit needs
of young, beginning or small farmers.
[[Page 67187]]
Subpart K--Disclosure of Loan Information
Sec. 614.4440 [Amended]
15. Section 614.4440 is amended by removing the reference to
``paragraph (f)'' and adding in its place the reference ``paragraph
(g)'' in paragraph (h)(1).
Subpart L--Actions on Applications: Review of Credit Decisions
16. Section 614.4444 is amended by revising the last two sentences
to read as follows:
Sec. 614.4444 Records.
* * * The file shall include minutes of each credit review
committee meeting, and sufficient documentation of the basis for each
determination not to restructure a loan to permit the institution or
the FCA to review each determination.
Subpart N--Loan Servicing Requirements; State Agricultural Loan
Mediation Programs; Right of First Refusal
17. Section 614.4510 is amended by removing paragraphs (b) and
(d)(4); by redesignating paragraphs (c) and (d) as paragraphs (b) and
(c); and by revising the introductory paragraph, paragraph (a), and
newly designated paragraph (c) introductory text to read as follows:
Sec. 614.4510 General.
Direct lenders shall be responsible for the servicing of the loans
that they make. However, loan participation agreements may designate
specific loan servicing efforts to be accomplished by a participating
institution. Each direct lender shall adopt loan servicing policies and
procedures to assure that loans will be serviced fairly and equitably
for the borrower while minimizing the risk for the lender. Procedures
shall include specific plans that help preserve the quality of sound
loans and that help correct credit deficiencies as they develop.
(a) The Farm Credit Bank shall provide guidelines for the servicing
of loans by the Federal land bank associations. The servicing may be
accomplished either under the direct supervision of the bank or under
delegated authority.
* * * * *
(c) In the development of loan servicing policies and procedures,
the following criteria shall be included:
* * * * *
Sec. 614.4515 [Reserved]
18. Section 614.4515 is removed and reserved.
19. Section 614.4516 is amended by revising the heading and adding
the following introductory paragraph before paragraph (a) to read as
follows:
Sec. 614.4516 Restructuring policy and procedures.
Loan restructurings are to be accomplished with the policy adopted
by the bank board of directors under section 4.14A(g) of the Act.
* * * * *
20. Section 614.4517 is amended by adding paragraph (c) as follows:
Sec. 614.4517 Restructuring decision.
* * * * *
(c) Documentation. In the event that an application for
restructuring is denied, a qualified lender shall maintain sufficient
documentation to demonstrate its compliance with paragraphs (a) and (b)
of this section, as applicable.
Sec. 614.4520 [Reserved]
21. Section 614.4520 is removed and reserved.
Subpart O--Special Lending Programs
Sec. 614.4525 [Amended]
22. Section 614.4525 is amended by adding the words ``and
agricultural credit associations'' after the words ``Production credit
associations'' in the first sentence of paragraph (c); and by removing
the words ``Subject to the approval of the respective banks board of
directors, Federal land banks, Federal intermediate credit banks, for
cooperatives, and production credit associations'' and adding in their
place the words ``Farm Credit System institutions that are direct
lenders'' in the first sentence of paragraph (d).
PART 615--FUNDING AND FISCAL AFFAIRS, LOAN POLICIES AND OPERATIONS,
AND FUNDING OPERATIONS
23. The authority citation for part 615 continues to read as
follows:
Authority: Secs. 1.5, 1.7, 1.10, 1.11, 1.12, 2.2. 2.3, 2.4, 2.5,
2.12, 3.1, 3.7, 3.11, 3.25, 4.3, 4.3A, 4.9, 4.14B, 4.25, 5.9, 5.17,
6.20, 6.26, 8.0, 8.4, 8.6, 8.7, 8.8, 8.10, 8.12 of the Farm Credit
Act (12 U.S.C. 2013, 2015, 2018, 2019, 2020, 2073, 2074, 2075, 2076,
2093, 2122, 2128, 2132, 2146, 2154, 2154a, 2160, 2202b, 2211, 2243,
2252, 2278b, 2278b-6, 2279aa, 2279aa-3, 2279aa-4, 2279aa-6, 2279aa-
7, 2279aa-8, 2279aa-10, 2279aa-12); sec. 301(a) of Pub. L. 100-233,
101 Stat. 1568, 1608; sec. 105 of Pub. L. 104-105, 110 Stat. 162,
163-64.
Subpart D--Other Funding
Sec. 615.5120 [Amended]
24. Section 615.5120 is amended by adding the words ``or
agricultural credit bank'' after the words ``Farm Credit Bank'' in the
fourth sentence of paragraph (a).
25. Section 615.5140 is amended by revising paragraph (a)(1) to
read as follows:
Sec. 615.5140 Eligible investments and risk diversification.
(a) * * *
(1) Obligations of the United States; full-recourse obligations,
other than mortgage-backed securities, of agencies, instrumentalities
or corporations of the United States; or debt obligations of other
obligors that are fully insured or guaranteed as to both principal and
interest by the United States, its agencies, instrumentalities, or
corporations;
* * * * *
Subpart E--Investment Management
Sec. 615.5143 [Amended]
26. Section 615.5143 is amended by adding the words ``and
agricultural credit banks'' at the end of the heading; by adding the
words ``or agricultural credit banks' '' after the words ``banks for
cooperatives' '' in the first sentence; and by adding the words ``or
agricultural credit bank'' after the words ``bank for cooperatives'' in
the fourth and fifth sentences of the paragraph.
Subpart I--Issuance of Equities
27. Section 615.5250 is amended by revising paragraph (e) to read
as follows:
Sec. 615.5250 Disclosure requirements.
* * * * *
(e) The requirements of this section shall not apply to the sale of
Farm Credit System institution equities to other Farm Credit System
institutions, other financing institutions, or non-Farm Credit System
lenders.
Subpart J--Retirement of Equities
28. Section 615.5280 is amended by revising paragraphs (a), (b),
(c), (d) and (e) to read as follows:
Sec. 615.5280 Retirement in event of default.
(a) When the debt of a holder of eligible borrower stock issued by
a production credit association, Federal land association, Federal land
credit association or agriculture credit association is in default,
such institution may, but shall not be required to, retire at par
eligible borrower stock owned by such borrower
[[Page 67188]]
on which the institution has a lien, in total or partial liquidation of
the debt.
(b) When the debt of a holder of stock, participation certificates
or other equities issued by a production credit association, Federal
land bank association, Federal land credit association or agricultural
credit association is in default, such institution may, but shall not
be required to, retire at book value not to exceed par all or part of
such equities, other than eligible borrower stock as defined in
Sec. 615.5260(a)(1), owned by such borrower on which the institution
has a lien, in total or partial liquidation of the debt.
(c) When the debt of a holder of equities or guaranty fund
certificates issued by a bank for cooperatives or agricultural credit
bank is in default the bank may, but shall not be required to, retire
all or part of such equities qualify or guaranty fund investments owned
by the borrower on which the bank has a lien, in total or partial
liquidation of the debt. If such investments qualify as eligible
borrower stock, it shall be retired at par, as defined in
Sec. 615.5260(a)(3). All other investments shall be retired at a rate
determined by the institution to reflect its present value on the date
of retirement.
(d) When the debt of a holder of the equities of a Farm Credit Bank
or agricultural credit bank is in default the bank may, but shall not
be required to, retire all or part of such equities owned by the
borrower on which the bank has a lien, in total or partial liquidation
of the debt. If such equities qualify as eligible borrower stock or are
retired solely to permit a Federal land bank association to retire
eligible borrower stock under Sec. 615.5280(a), they shall be retired
at par. All other equities shall be retired at book value not to exceed
par.
(e) Any retirements made under this section by a Federal land bank
association shall be made only upon the specific approval of, or in
accordance with, approval procedures issued by the association's
funding bank.
* * * * *
Sec. 615.5290 [Amended]
29. Section 615.5290 is amended by adding the words ``or
agricultural credit bank'' after each reference to ``Farm Credit Bank''
in paragraph (a).
PART 618--GENERAL PROVISIONS
30. The authority citation for part 618 continues to read as
follows:
Authority: Secs. 1.5, 1.11, 1.12, 2.2, 2.4, 2.5, 2.12, 3.1, 3.7,
4.12, 4.13A, 4.25, 4.29, 5.9, 5.10, 5.17 of the Farm Credit Act (12
U.S.C. 2013, 2019, 2020, 2073, 2075, 2076, 2093, 2122, 2128, 2183,
2200, 2211, 2218, 2243, 2244, 2252).
Subpart F--Miscellaneous Provisions
Sec. 618.8260 [Reserved]
31. Section 618.8260 is removed and reserved.
Subpart G--Releasing Information
Sec. 618.8310 [Amended]
32. Section 618.8310 is amended by adding the words ``agricultural
credit bank'' before the words ``bank for cooperatives'' in paragraph
(b)(1).
33. Section 618.8320 is amended by removing paragraph (b)(9); by
redesignating paragraphs (b)(10) and (b)(11) as new paragraphs (b)(9)
and (b)(10) consecutively; and by revising paragraphs (b)(2) and (b)(5)
to read as follows:
Sec. 618.8320 Data regarding borrowers and loan applicants.
* * * * *
(b) * * *
(2) In connection with a legitimate law enforcement inquiry,
accredited representatives of any agency or department of the United
States may be given access to information upon presentation of official
identification and a written request specifying:
(i) The particular information desired; and
(ii) That the information is relevant to the law enforcement
inquiry and will be used only for the purpose for which it is sought.
* * * * *
(5) Impersonal information based solely on transaction or
experience with a borrower, such as amounts of loans, terms and payment
records, may be given by a bank or association to a consumer reporting
agency, or any other reliable organization for its confidential use in
contemplation of the extension of credit.
* * * * *
Sec. 618.8325 [Amended]
34. Section 618.8325 is amended by removing the commas after the
words ``offices'', ``charter'', and ``inspection'' in paragraph (c).
Sec. 618.8330 [Amended]
35. Section 618.8330 is amended by removing paragraph (b) and
removing the designation from paragraph (a).
Sec. 618.8340 [Reserved]
36. Section 618.8340 is removed and reserved.
Subpart H--Disposition of Obsolete Records
Sec. 618.8360 [Reserved]
37. Section 618.8360 is removed and reserved.
Sec. 618.8370 [Reserved]
38. Section 618.8370 is removed and reserved.
Subpart I [Reserved]
39. Subpart I, consisting of Secs. 618.8380 through 618.8420, is
removed and reserved.
PART 619--DEFINITIONS
40. The authority citation for part 619 continues to read as
follows:
Authority: Secs. 1.7, 2.4, 4.9, 5.9, 5.12, 5.17, 5.18, 7.0, 7.6,
7.7, 7.8 of the Farm Credit Act (12 U.S.C. 2015, 2075, 2160, 2243,
2246, 2252, 2253, 2279a, 2279b, 2279b-1, 2279b-2).
41. Section 619.9060 is revised to read as follows:
Sec. 618.9060 Bank for cooperatives.
A bank for cooperatives is a bank that is operating under section
3.0 of the Act.
Dated: December 12, 1996.
Floyd Fithian,
Secretary, Farm Credit Administration Board.
[FR Doc. 96-32309 Filed 12-19-96; 8:45 am]
BILLING CODE 6705-01-M
