00-18283. Notice and Request for Comment

AGENCY:

Farm Credit Administration.

SUMMARY:

The Farm Credit Administration (FCA or Agency) is seeking comment on its May 3, 2000, publication entitled National Charters (Booklet). This Booklet, which the FCA sent to all Farm Credit System (System or FCS) institutions, provides guidance on the national charter application process and the national charter territory. Specifically, the Booklet explains how a direct lender association can apply for a national charter; what the territory of a national charter will be; and what conditions the FCA will impose in connection with granting a national charter. As explained in the Booklet, the FCA began accepting applications from System institutions on July 1, 2000. The FCA has received several requests from interested parties to publish the Booklet for public comment. Additionally, several interested parties have raised safety and soundness issues concerning national charters. While it is not subject to a notice and comment requirement, the Booklet has been on our Web site and available to the public since May 3, 2000. We agree that publishing the Booklet in the Federal Register and providing an additional opportunity for interested parties to comment will assist the FCA Board as it makes future chartering decisions.

DATES:

Please send your comments to us on or before August 31, 2000.

ADDRESSES:

You may send comments by electronic mail to “[e-mail]” or through the Pending Regulations section of our Web site at “www.fca.gov.” You may also mail or deliver written comments to Patricia W. DiMuzio, Director, Regulation and Policy Division, Office of Policy and Analysis, Farm Credit Administration, 1501 Farm Credit Drive, McLean, Virginia 22102-5090 or send them by facsimile transmission to [phone]. You may review copies of all comments we receive in the Office of Policy and Analysis, Farm Credit Administration.

FOR FURTHER INFORMATION CONTACT:

S. Robert Coleman, Senior Policy Analyst, Office of Policy and Analysis, Farm Credit Administration, McLean, VA 22102-5090, [phone], TDD [phone],

or

Jennifer A. Cohn, Senior Attorney, Office of General Counsel, Farm Credit Administration, McLean, VA 22102-5090, [phone], TDD [phone].

SUPPLEMENTARY INFORMATION:

I. Objectives

Our objectives are to:

• Provide guidance for System institutions to apply for a national charter;
• Provide an additional opportunity for the public to comment on this guidance; and
• Address any safety and soundness concerns regarding national charters.

II. General Information

In July 1998, the FCA Board issued a philosophy statement that, among other things, announced the FCA's support for removing regulatory geographic barriers imposed on FCS institutions. Initially, the FCA approached this objective with a proposed rulemaking. On November 9, 1998, we published a proposed rule that would have eliminated geographic restrictions on direct lending, related services, and certain loan participations by amending or repealing several regulations in parts 611, 614, and 618. See 63 FR 60219 (Nov. 9, 1998). Although the 90-day comment period was scheduled to expire on February 9, 1999, we extended it until May 10, 1999, at the request of several commenters. See 63 FR 69220 (Dec. 16, 1998).

The FCA received considerable comments and insight during the 6-month public comment period on the proposed rule. On April 25, 2000, we published a final rule that deleted the requirements for a System institution to provide notice to or seek consent from other System institutions when it buys participation interests in loans originated outside its chartered territory. See 65 FR 24101 (Apr. 25, 2000). This final rule became effective on May 25, 2000. See 65 FR 33743 (May 25, 2000). Other parts of our original proposal—those that would have removed restrictions on direct lending and related services outside an institution's designated territory—remain pending.

III. National Charters

Through an Informational Memorandum dated March 8, 2000, issued to all FCS institutions, the FCA Board announced plans to remove the restrictions on direct lending and related services through the chartering process. The FCA exercises its powers to issue or amend charters under sections 2.0, 2.10 and 5.17 of the Farm Credit Act of 1971, as amended.

Through a second Informational Memorandum to all FCS institutions dated May 3, 2000, the FCA Board provided guidance on national charters by publishing a booklet entitled National Charters. The Booklet explains (1) how a direct lender association can apply for a national charter; (2) what the territory of a national charter will be; and (3) that the FCA will impose certain conditions in connection with granting a national charter. The FCA published this Booklet after gathering information on removing regulatory geographic restrictions during the listening sessions at the Agency's annual Information Exchange meetings between the FCS institutions and the FCA Board held in March and April 2000.

The FCA believes removing unnecessary geographic restrictions through national charters is in the best economic interest of rural America. National charters will help level the playing field for all participants and provide benefits to farmers, ranchers and rural America.

National charters can improve safety and soundness risk by diluting the geographic risk in a System institution's loan portfolio. The FCA believes associations that hold national charters will be more geographically diverse and financially stronger than if we continue to restrict institutions to limited geographic areas, which can be prone to isolated weather and economic adversities.

As the safety and soundness regulator of the Farm Credit System, we are sensitive to any risk affecting System institutions. In order to correct any safety and soundness problems in the Farm Credit System, the FCA will continue to use its examination and enforcement powers to correct problems in FCS institutions.

National charters further support our July 1998 philosophy statement by removing existing geographic constraints on System entities. Removing these artificially imposed constraints will promote greater efficiency, improve customer service, and enhance the System's ability to meet the current and future needs of rural America. Furthermore, this action will allow FCS institutions to better structure their businesses as market forces and customer demands change. The FCA believes national charters will provide farmers, ranchers, and other eligible rural residents with more choices, which we believe will improve the availability, price, and quality of agricultural credit. Finally, national charters benefit rural communities as artificial regulatory territorial boundaries are removed. System institutions may elect to form new partnerships and alliances with each other and other commercial firms, which will benefit all of agriculture and rural America over time.

National charters will enable direct lender associations in the System to provide seamless credit to agricultural producers that do business across the United States without the burdensome and unnecessary notice and consent requirements currently in place. Removing these geographic constraints also will allow System institutions to better manage their credit risks by diversifying the geographic risk in their loan portfolios.

The Booklet imposes no requirements on System institutions or others. Rather, it is an announcement of our intended position on future chartering actions. Accordingly, it is not subject to a notice and comment requirement. Nevertheless, we are providing this notice and additional opportunity to comment to allow input from all interested parties as the FCA Board considers its future chartering decisions. We are taking this action in response to several requests from interested parties.

IV. National Charter Applications

The Booklet states that we will process all national charter applications we receive between July 1, 2000, and September 30, 2000, so that, if the FCA Board approves them, they will all be effective on January 1, 2001. By this notice, we seek additional comments on the Booklet and on the issues that national chartering raises. The Booklet is set forth below in its entirety. If you prefer to download the Booklet from our Web site, it has been posted there since May 3, 2000. The FCA Board will consider all comments as it makes future chartering decisions.

Dated: July 14, 2000.

Kelly Mikel Williams,

Secretary, Farm Credit Administration Board.