[Federal Register Volume 63, Number 129 (Tuesday, July 7, 1998)]
[Rules and Regulations]
[Pages 36541-36549]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-17844]
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Rules and Regulations
Federal Register
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Federal Register / Vol. 63, No. 129 / Tuesday, July 7, 1998 / Rules
and Regulations
[[Page 36541]]
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FARM CREDIT ADMINISTRATION
12 CFR Parts 611, 614, 620, and 630
RIN 3052-AB67
Organization; Loan Policies and Operations; Disclosure to
Shareholders; Disclosure to Investors in Systemwide and Consolidated
Bank Debt Obligations of the Farm Credit System; Other Financing
Institutions
AGENCY: Farm Credit Administration.
ACTION: Final rule.
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SUMMARY: The Farm Credit Administration (FCA or Agency), through the
FCA Board (Board), issues a final rule amending its regulations that
govern the funding and discount relationship between Farm Credit System
(Farm Credit, FCS, or System) banks that operate under title I of the
Farm Credit Act of 1971, as amended (Act), and non-System other
financing institutions (OFIs). The final rule substantially expands
access to System funding so OFIs can provide more short-and
intermediate-term credit to parties who are eligible to borrow under
sections 2.4(a) and (b) of the Act. The FCA has repealed several non-
statutory limits on OFI eligibility. The final rule assures access to
any creditworthy OFI that is significantly involved in agricultural
lending and demonstrates a continuing need for funds to serve its
agricultural borrowers. Under certain circumstances, OFIs may seek
financing from a Farm Credit Bank (FCB) or agricultural credit bank
(ACB) other than the System bank that is chartered to serve its
territory. The final rule requires FCBs and ACBs to finance OFIs only
on a fully secured basis and to have full recourse to the OFI's
capital.
EFFECTIVE DATE: This regulation shall become effective 30 days after
publication in the Federal Register during which either or both houses
of Congress are in session. Notice of the effective date will be
published in the Federal Register.
FOR FURTHER INFORMATION CONTACT: Eric Howard, Policy Analyst or S.
Robert Coleman, Senior Policy Analyst, Regulation and Policy Division,
Office of Policy Analysis, Farm Credit Administration, McLean, VA
22102-5090, (703) 883-4498,
or
Richard A. Katz, Senior Attorney, Regulatory Enforcement Division,
Office of General Counsel, Farm Credit Administration, McLean, VA
22102-5090, (703) 883-4020, TDD (703) 883-4444.
SUPPLEMENTARY INFORMATION: This final rule completes a 2-year effort by
the FCA to revise these regulations so that farmers, ranchers, and
other eligible rural residents have greater access to credit through
OFIs that are financed by FCBs and ACBs. On May 17, 1996, the FCA
published an Advance Notice of Proposed Rulemaking seeking comments on
how these regulations could be more responsive to the credit needs of
OFIs and their borrowers. See 61 FR 24907. In response to these
comments, the FCA proposed a rule that substantially revised the
regulations in subpart P of part 614. See 62 FR 38223 (July 17, 1997).
After considering the comments received, the FCA Board adopts a final
rule that provides greater opportunities for OFIs to obtain funding
from FCS banks so they can finance agriculture, aquaculture, and other
specified rural credit needs.
Sixteen comment letters were received in response to the proposed
rule. Of this total, comments were received from 4 trade associations,
5 FCS banks (one comment letter came from 2 FCS banks that are jointly-
managed), 4 System direct lender associations, a federation
representing System production credit associations (PCAs), a commercial
bank, a commercial bank holding company, and an existing OFI. Four
trade associations submitted comments on behalf of their members: the
American Bankers Association (ABA); the Independent Bankers Association
of America (IBAA); the North Dakota Bankers Association (NDBA); and the
Farm Credit Council (Council).
The comment letters revealed a diverse range of views about OFI
access to System funding. All System direct lender association
commenters, except one, opposed any revision to the existing OFI
regulation because of their concerns over competition. One commercial
bank supported the proposed rule and urged the FCA to adopt it as a
final rule without revision. Three commercial bank trade associations
recognized the FCA's efforts to improve OFI access to System funding,
but they recommended modifications to the rule. The remaining
commenters focused on specific issues that were important to their
institutions.
Commercial bank trade associations opined that the FCA's regulatory
proposal made progress toward granting OFIs more access to System
funding. However, these commenters believe that several provisions of
the statute discourage many commercial banks from becoming OFIs. The
most commonly cited statutory impediments to greater commercial bank
participation in this program include: (1) No authority for OFIs to
obtain System bank funding \1\ for long-term mortgages; (2) lack of OFI
representation on the boards of FCS funding banks; and (3) the need to
offer borrower rights. For these reasons, the commenters again asked
the FCA to support legislative initiatives that would remodel the FCS
so it is similar to the Federal Home Loan Bank System. As the
commenters acknowledge, the existing statute does not enable the FCA to
accommodate some of their requests, and therefore, these issues are not
addressed by this rulemaking.
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\1\ As used in this preamble, references to Farm Credit banks
apply only to FCBs and ACBs. Although the bank for cooperatives is
also a System bank, it lacks statutory authority to finance the OFIs
identified in section 1.7(b) of the Act.
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Several PCA commenters expressed concern that expanded OFI access
would place them at a competitive disadvantage. These commenters asked
the FCA to enact regulations that provide PCAs with more business
opportunities before final OFI regulations are adopted. Although
several commenters stated that PCAs cannot effectively compete with
OFIs until their intermediate-term lending authorities are expanded,
section 1.10(b) of the Act establishes the maximum timeframe for
intermediate-term loans.
The FCA has considered the concerns of the commenters and adopts a
final rule that balances the needs of these parties. The final rule
incorporates
[[Page 36542]]
many of the commenters' suggestions and promotes a safe and sound
lending relationship between System funding banks and their OFIs. The
changes increase availability of credit to farmers, ranchers, aquatic
producers and harvesters, and other eligible rural borrowers.
I. OFI Access
A. Proposed Rule and Comments
The FCA proposed a two-tier approach for OFIs to establish their
eligibility for a funding and discount relationship with a System bank.
Under Sec. 614.4540(a), any financial institution that operates under
one of the charters specified in section 1.7(b)(1)(B) of the Act may
borrow from an FCB or ACB. Additionally, Sec. 614.4540(b) assures
access to creditworthy OFIs that have at least 15 percent of their
loans to agricultural or aquatic producers and enter into a 2-year
funding agreement with an FCB or ACB. The regulations require OFIs to
use System funding only to extend short- and intermediate-term credit
to eligible persons for authorized purposes under sections 1.10(b) and
2.4(a) and (b) of the Act. This new approach enables more OFIs to
borrow from System banks, and as a result, farmers and ranchers should
have greater access to affordable and dependable credit.
The FCA proposed to repeal the following eligibility provisions of
the existing regulations that are not required by the Act:
The 60-percent loan-to-deposit ratio for OFIs that are
depository institutions;
The requirement that OFIs primarily use locally generated
funds for lending operations;
The automatic denial of access to any entity that
primarily finances the sale of products by its affiliates;
Consideration of an OFI applicant's relationship with its
affiliates and subsidiaries; and
A mandatory non-use fee for OFIs that fail to maintain a
specified average daily loan balance.
The FCA received comments on proposed Sec. 614.4540 from the ABA,
IBAA, NDBA, and the Council. These commenters supported the repeal of
the non-statutory OFI eligibility criteria that are identified above.
The final rule repeals these provisions.
Although all four trade associations supported greater OFI access
to System funding, they expressed differing views on the need to modify
proposed Sec. 614.4540. The NDBA supported the two-tier approach for
OFI access. The Council requested that the FCA amend the regulation so
it expressly conveys that System funding banks have discretion to deny
the credit application of any OFI that is not covered by
Sec. 614.4540(b).
The ABA and IBAA requested amendments that would favor their
respective constituencies. The IBAA believes that the regulation should
favor small, rural community banks whereas the ABA opined that all
banks that provide agricultural credit should be entitled to System
funding. The IBAA commented that no lender should be granted access to
the FCS unless agricultural loans comprise at least 10 percent of its
loan portfolio. Although the IBAA supports the 15-percent threshold for
assured access, it believes that OFIs that meet this criterion should
be entitled to preferred status and special benefits, such as the
lowest cost of funds from System banks and greater flexibility
concerning collateral requirements. In contrast, the ABA suggested that
any commercial bank should be assured access under final
Sec. 614.4540(b) if agricultural loans comprise at least 10 percent of
its loan portfolio, or exceed a fixed dollar amount, such as
$5,000,000. In the ABA's view, the final rule should include a fixed
dollar threshold because agricultural loans often comprise a small
percentage of the loan portfolios of large commercial banks that are
major providers of agricultural credit. This commenter believes that
these large commercial banks deserve assured access to System funding.
The ABA also asked the FCA to reorganize proposed Sec. 614.4540.
The commenter suggested that the FCA relocate the provisions in
proposed Sec. 614.4540(b) that enable FCBs and ACBs to deny the funding
requests of OFIs that are assured access to Sec. 614.4540(c), which
governs denials. The ABA stated that this change would clearly
communicate the FCA's expectations to System banks and make this
regulation more user-friendly.
The IBAA requested that the FCA assume a more active role in
collecting and reporting information about the efforts of each System
bank to provide agricultural credit through OFIs. Specifically, the
commenter suggested that the FCA appoint an Ombudsman to review
complaints by OFIs. Additionally, the IBAA recommended that the FCA's
Annual Report contain comprehensive information about the number of OFI
applications, the number of funding requests that are either approved
or denied, a summary of the reasons for denial, and the total amount of
funds that System banks advance to OFIs. The IBAA also asked that the
final regulations require outside board members to represent OFI
interests and establish target goals for the minimum number of new
commercial bank OFIs that each System bank will approve every year.
B. Final Rule
Final Sec. 614.4540 retains the two-tier approach to OFI
eligibility as proposed. The FCA continues to believe that this
regulatory approach best implements the requirements of the Act.
Section 1.7(b) of the Act and its legislative history indicate that
Congress intended that Farm Credit banks primarily provide financial
assistance to small, local OFIs, but it did not exclude other
agricultural creditors from this program.\2\
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\2\ See H.R. 96-1287, 96th Cong., 2d. Sess., (1980), 21, 32-34.
See also 126 Cong. Rec. H 10960-64 (daily ed. Nov. 19, 1980).
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The FCA was not persuaded by the IBAA's request to exclude large
financial institutions and the ABA's request to grant most large
commercial banks the same assured access to FCS funding as small, local
OFIs. Accordingly, the FCA does not adopt the IBAA's recommendation to
amend Sec. 614.4540(a) so that OFI applicants are automatically denied
access to FCS funding if agricultural loans comprise less than 10
percent of their loan portfolios. In addition, the final regulation
does not incorporate the ABA's request that final Sec. 614.4540(b)
grant assured access to OFIs that have at least $5,000,000 or 10
percent of their loan portfolio in agricultural loans. The FCA
emphasizes that the final regulation allows any institution, including
large financial institutions, to fund or discount their agricultural
loans with an FCB or ACB, but it does not assure access to creditworthy
OFIs unless they have at least 15 percent of their loans in agriculture
and enter into a 2-year funding relationship. The FCA continues to
believe that the 15-percent threshold is the best measure of whether an
OFI is significantly involved in agricultural or aquatic lending, as
section 1.7(b)(4)(B)(i) of the Act requires.
The IBAA requested that the final regulation require FCBs and ACBs
to provide the lowest cost of funds and other special benefits to OFIs
that are entitled to assured access. This request would unnecessarily
involve the regulator in the daily business decisions of System banks.
Additionally, final Sec. 614.4590 requires Farm Credit banks to treat
their OFIs equitably and to determine loan rates through an objective
process. The FCA believes that System funding banks should retain
[[Page 36543]]
discretion to negotiate the price of funding and other loan terms with
OFIs. The final rule fulfills the FCA's responsibility to ensure that
FCBs and ACBs abide by their statutory mission to finance creditworthy
OFIs in a safe and sound manner.
Many of the ABA's suggestions for reorganizing Sec. 614.4540 have
been incorporated into the final rule. The FCA adopts proposed
Sec. 614.4540(a) as a final regulation, without revision. This
provision allows FCBs and ACBs to fund and discount short- and
intermediate-term agricultural, aquatic, processing and marketing,
farm-related business, and rural home loans for any financial
institution that operates under a charter specified in section
1.7(b)(1)(B) of the Act. As amended, final Sec. 614.4540(b) grants
assured access to creditworthy OFIs that maintain at least 15 percent
of their loan volume to agricultural and aquatic producers and enter
into a 2-year funding or discount relationship with an FCB or ACB.
Final Sec. 614.4540(c) retains the requirement in the proposed
regulation that FCBs and ACBs establish objective policies and loan
underwriting standards for determining the creditworthiness of each OFI
applicant. Under final Sec. 614.4540(d), FCBs and ACBs can deny the
funding requests of creditworthy OFIs that satisfy the conditions in
Sec. 614.4540(b) only if such requests: (1) Adversely affect the Farm
Credit bank's ability to achieve and maintain established or projected
capital levels or raise funds in the money markets; or (2) otherwise
expose the Farm Credit bank to safety and soundness risks. The Council
requested that the FCA amend Sec. 614.4540(a) so it expressly conveys
that System funding banks have discretion to deny the credit
application of any OFI that is not assured access. This revision is
unnecessary because Sec. 614.4540(c) requires FCBs and ACBs to develop
loan underwriting standards for all OFI applicants. As a result, the
framework of this regulation provides FCS banks appropriate discretion,
under their policies and loan underwriting standards, to deny the
funding requests of OFIs that are not assured access.
Commercial bank trade associations commented that the proposed
regulation did not require System funding banks to explain their reason
for denying an OFI's application. In response to this concern, the FCA
adds Sec. 614.4540(e) that requires System banks to expeditiously
process all OFI funding requests and to promptly provide all applicants
written notification of the credit decision. Additionally, System banks
must provide the applicant with specific reasons for any adverse credit
decision.
In response to the IBAA's recommendation about comprehensive
reporting on OFIs, the FCA adds new Sec. 614.4540(f), which requires
the board of directors of each FCB and ACB to receive annual written
reports about the scope of their OFI program activities during the
preceding fiscal year. The FCA expects that these annual reports will
identify:
The number of OFI applicants by category (such as
commercial banks, credit unions, agricultural credit corporations,
etc.);
The number of approved and denied OFI applications;
A summary of the reasons for denying OFI applications;
The total amount of funds advanced to OFIs; and
Other information necessary to evaluate the success of the
System bank's OFI program.
Periodically, the FCA may issue special calls for this information.
The FCA does not adopt the IBAA's request to appoint an OFI
Ombudsman because there are more efficient ways for the FCA to address
concerns that OFIs may raise. The FCA Board does not accept the IBAA's
request that the Agency appoint outside board members to represent OFI
interests and to establish target goals for OFI lending. The FCA has no
authority under the Act to appoint directors to the boards of Farm
Credit banks. In further response to the IBAA, the Agency believes that
this rule offers FCS banks sufficient business incentives to extend
more credit to OFIs. Additionally, a creditworthy OFI has the option to
seek funding from another System funding bank if its designated FCB or
ACB denies or fails to approve its application.
II. Place of Discount
Proposed Sec. 614.4550 addresses place of discount for OFIs.
Proposed Sec. 614.4550(a) specifies that an FCB or ACB provide funding,
discount and other financial assistance to any OFI whose headquarters
is located within the funding bank's chartered territory. Under
proposed Sec. 614.4550(b), an FCB or ACB could finance an OFI whose
headquarters is not located in its chartered territory if the System
funding bank identified in Sec. 614.4550(a) consents, denies the OFI's
application, or otherwise fails to approve the funding request pursuant
to Regulation B of the Board of Governors of the Federal Reserve
System, 12 CFR 202.2(f).
The ABA, IBAA, NDBA, three FCBs and two PCAs commented on the place
of discount rule. AgFirst FCB supported the FCA's proposal. This
commenter believes that the proposal best enables FCS banks to fund
OFIs in today's market. The IBAA suggested that the FCA modify its
proposal to allow an OFI that is dissatisfied with its System funding
bank to seek financing from any other FCB or ACB. The ABA and the NDBA
urged the FCA to remove all geographic restrictions on place of
discount. These commenters believe that geographic restrictions hamper
the success of the OFI program because non-System financial
institutions are required to seek funding from a System bank that is
owned and controlled by their competitors. The FCB of Texas asserted
that the existing regulation governing place of discount is sound and
should not be changed. The commenter believes that the FCA's proposal
will ultimately lead to unsafe and unsound competition between FCS
banks for OFI business. The FCB of Texas opposed the proposal to make
an OFI's headquarters the sole factor to determine the place of
discount. Finally, two PCAs made the FCA aware of their concerns that
associations lack similar opportunities to seek funding from other FCBs
or ACBs. After the comment period expired, the FCA received an inquiry
from an FCB about whether existing OFIs would be required to change
their place of discount once the proposed regulation became final.
The FCA Board believed the proposed rule established a balanced
approach concerning the place of discount for OFIs. Traditionally, OFIs
have been required to establish a funding or discount relationship with
a System bank owned and controlled by their competitors. Several
commenters believe that this factor explains why the program has not
been widely used by commercial banks and other potential OFIs. The FCA
has addressed this concern by proposing a regulation that provides
additional flexibility concerning place of discount to OFI applicants.
The FCA believes that some limitations on the place of discount for
OFIs are appropriate because FCS charters specify territories that
System institutions serve. Direct lender associations do not have the
same options to obtain financing from other FCBs and ACBs, and
therefore, the recommendations of the three commercial bank trade
associations would not treat FCS direct lender associations fairly.
Additionally, the ABA's and NDBA's suggestion would deny an FCB or ACB
the first
[[Page 36544]]
opportunity to finance OFIs operating in its chartered territory. The
final rule permits OFIs to apply to any System funding bank after the
designated FCS bank rejects or fails to approve the OFI's application.
The FCA was not persuaded by the FCB of Texas' argument that changes to
the place of discount rule will lead to destructive competition that
will ultimately undermine the safety and soundness of the FCS.
In response to the comments, the FCA has modified proposed
Sec. 614.4550 to provide additional flexibility regarding an OFI's
place of discount. The final regulation continues to require OFIs to
apply first to the FCS bank that serves the territory where the OFI
operates. The FCA recognizes that some OFIs operate in the chartered
territory of two or more FCS banks. Under the final regulation, an OFI
may select the FCS funding bank that serves the territory where the OFI
is headquartered, or alternatively, where more than 50 percent of the
OFI's outstanding loan volume is concentrated.
If the designated funding bank denies, or otherwise fails to
approve an OFI's completed application within 60 days, final
Sec. 614.4550(b) allows the OFI to apply to any other FCB or ACB. Under
final Sec. 614.4550(c), the designated FCS bank may also grant an OFI
its consent to seek financing from any other System funding bank. The
FCA has redesignated this consent provision as final Sec. 614.4550(c)
to enhance the clarity of the regulation. A new provision,
Sec. 614.4550(d), states that an OFI is not required to terminate an
established funding or discount relationship with its System funding
bank if the OFI subsequently relocates its headquarters or experiences
a shift in its loan volume concentration.
As mentioned earlier, the FCB of Texas urged the FCA to retain the
existing regulation on place of discount. However, the FCB of Texas
asked the FCA to consider three alternatives if the final regulation
allows OFIs to seek funding from other FCS banks. First, the commenter
requested that the FCA modify the regulation to provide the designated
FCS bank with the ``right of first refusal'' for any lending agreement
that an OFI negotiated with another System bank. Second, the commenter
wanted the FCA to determine whether another FCS bank should be
permitted to finance each OFI that has been denied credit from the
designated System bank for safety and soundness reasons. Finally, the
FCB of Texas asked the FCA to clarify that the regulation prohibits an
OFI from ``shopping'' FCS banks for funding on a loan-by-loan basis.
The commenter sought confirmation that the regulation does not allow an
existing OFI to fund or discount individual loans with another System
bank if its funding bank rejects those same loans.
The FCA believes a specific ``right of first refusal'' is
unnecessary because the designated System bank will have already denied
or failed to approve the OFI's initial application. The requirement
that an OFI first seek funding from its designated bank is the
equivalent of a ``right of first refusal.'' In response to the
commenter's second request, the FCA need not determine whether another
FCB or ACB can finance an OFI that has been denied credit by its
designated funding bank because Sec. 614.4540(c) requires each FCB and
ACB to establish its own objective policies and loan underwriting
standards for determining an OFI applicant's creditworthiness. The FCA
will examine the extension of credit to OFIs in the same context of
safety and soundness as it does other risks held in the funding bank's
portfolio. The FCA clarifies that the regulation does not permit an OFI
to ``shop'' for FCS funding on a loan-by-loan basis because
Sec. 614.4560(a)(1) requires all OFIs to execute a general financing
agreement (GFA) to establish a funding or discount relationship with a
System funding bank. Under the circumstances, Sec. 614.4550(b) applies
to the overall relationship between an FCB or ACB and the OFI, not a
specific discounted loan.
III. Requirements for OFI Funding Relationships
Proposed Sec. 614.4560 implements several statutory provisions that
govern the funding and discount relationship between OFIs and System
funding banks. More specifically, each OFI is required to: (1) Execute
a GFA with its System funding bank; (2) purchase non-voting stock in
the System funding bank pursuant to the bank's bylaws; (3) extend
credit only to parties and for purposes that are authorized by sections
1.10(b) and 2.4(a) and (b) of the Act; (4) adhere to portfolio
limitations on non-farm rural home loans and certain processing and
marketing loans; and (5) comply with statutory and regulatory borrower
rights requirements for all agricultural and aquatic loans that an FCB
or ACB funds or discounts. Additionally, proposed Sec. 614.4560(e)
implements section 5.21 of the Act, which enables the FCA to examine
non-depository OFIs and obtain examination reports from the State
regulators of commercial banks, trust companies, and savings
associations. Under this regulatory provision, OFIs are required to
execute the applicable consent forms or releases before they obtain
financing from an FCB or ACB. Section 5.22 of the Act enables the FCA
to receive examination reports directly from other Federal regulatory
agencies.
The FCA proposed to repeal existing Sec. 614.4650, which contains
five criteria for a System funding bank to revoke or suspend an OFI's
line of credit. The FCA expects each FCS bank to incorporate criteria
for revoking or suspending its funding relationship with an OFI into
its policies and loan underwriting standards. This issue should also be
addressed in the GFA between an OFI and the System funding bank.
The FCA received only one comment about proposed Sec. 614.4560. The
IBAA commented that the FCA should establish general guidelines for
FCBs and ACBs to follow when they negotiate GFAs with their OFIs.
Additionally, the commenter suggested that the FCA consult with OFIs to
develop a model GFA.
The FCA recently adopted a GFA rule that eliminated Agency prior-
approval of GFAs. See 63 FR 12401, March 13, 1998. The new rule
addresses the IBAA's concerns because they provide general guidelines
for developing GFAs between System funding banks and OFIs. However, the
FCA does not believe it should interfere in the business operations of
System banks by negotiating with OFIs to develop a model GFA. The FCA
adopts proposed Sec. 614.4560 as a final regulation.
IV. Recourse and Security Requirements
Proposed Sec. 614.4570 would prohibit any FCB or ACB from extending
credit to an OFI on an unsecured, limited, or non-recourse basis.
Proposed Sec. 614.4570(a) requires an OFI to endorse all obligations
that it funds or discounts through an FCB or ACB with full recourse or
its unconditional guarantee. Proposed Sec. 614.4570(b)(1) requires each
OFI to pledge all notes, drafts, and other obligations that are funded
or discounted with the FCB or ACB as collateral for the credit
extension. Proposed Sec. 614.4570(b)(2) obligates each FCB or ACB to
perfect its security interest in such obligations and the proceeds
thereunder in accordance with applicable State law.
A. Full Recourse
An existing OFI, the Council, and two jointly managed FCBs opposed
the full recourse requirement in Sec. 614.4570(a). The existing OFI
commented that the full recourse requirement would
[[Page 36545]]
seriously jeopardize any new opportunities that the new regulation
creates for expanded OFI access. One of the jointly managed FCBs
expressed concern about how the full recourse requirement in the
proposal would affect its relationship with an existing OFI and
potential opportunities to finance new OFIs in the future. The Council
believes recourse to an OFI's capital should be subject to negotiation
between the parties, and each System bank's loan underwriting standards
should address this issue.
From a safety and soundness perspective, FCBs and ACBs need full
recourse to an OFI's capital in the event of default. Full recourse is
necessary because the final rule significantly expands OFI access to
the FCS and it repeals many existing regulatory restraints on the
funding and discount relationship between System banks and their OFIs.
Section 1.7(b)(3)(A) of the Act prohibits a System bank from funding an
OFI if its aggregate liabilities exceed ten times its paid-in and
unimpaired capital and surplus. In light of this statutory safety and
soundness requirement, the FCA believes that it is prudent for FCS
banks to have full recourse to an OFI's capital. Additionally, the
regulations in 12 CFR part 615, subpart H, require FCS lenders to hold
sufficient capital as a cushion against risk in all loans. Full
recourse to an OFI's capital strengthens the FCS funding bank's risk-
bearing capacity. System funding banks are required to have full
recourse to the capital of direct lender associations. Since OFIs have
access to other sources of funds, they may expose System funding banks
to greater risk of loss than direct lender associations.
B. Security
The FCA received comments from the ABA, IBAA, and the Council about
the security OFIs are required to pledge under proposed
Sec. 614.4570(b). The ABA and the IBAA requested that the final
regulation provide OFIs with additional flexibility to pledge other
types of collateral to their FCS funding bank. The ABA opposed
Sec. 614.4570(b) because it requires OFIs to pledge all loans that are
actually funded by the FCS bank as primary collateral. The commenter
believes the requirement is particularly burdensome due to the tracking
and recordkeeping that it entails. The ABA recommended that an OFI be
allowed to pledge unrelated agricultural loans as collateral. The
Council commented that loan perfection should be determined by the FCS
funding bank's underwriting standards.
The security requirements of Sec. 614.4570(b) ensure compliance
with two sections of the Act. First, section 1.7(b) of the Act requires
OFIs to use funds from a title I bank only for the purpose of extending
short- and intermediate-term credit to eligible borrowers for
authorized purposes under section 2.4(a) and (b) of the Act. Second,
OFIs are required to track which loans are funded or discounted through
the FCB or ACB funding relationship to ensure compliance with the
borrower rights requirements of the Act. In light of these statutory
requirements, the FCA does not adopt the ABA's suggestion to allow an
OFI to pledge other agricultural loans as primary collateral to a
System funding bank. However, Sec. 614.4570(c) permits System funding
banks to accept long-term mortgages on agricultural assets as
supplemental collateral. Final Sec. 614.4570(b)(2) requires that FCBs
and ACBs perfect, in accordance with State law, a senior security
interest in any and all obligations that an OFI pledges as collateral.
In summary, the FCA's new regulatory approach for OFI financing
affords OFIs greater flexibility and additional access to the FCS. To
ensure the safe and sound implementation of the OFI program, the FCA
adopts proposed Sec. 614.4570 as a final regulation without revision.
V. Limitation on the Extension of Funding, Discount and Other
Similar Financial Assistance to an OFI
Proposed Sec. 614.4580 derives from section 1.7(b)(3) of the Act.
This statutory provision prohibits a System funding bank from extending
credit to an OFI if its aggregate liabilities exceed ten times its
paid-in and unimpaired capital and surplus, or a lesser amount
established by the laws of the jurisdiction creating the OFI.
The IBAA commented that the FCA should discourage FCBs and ACBs
from establishing less than a 10:1 capital ratio, except under rare
circumstances. The commenter expressed concerns that a more stringent
capital requirement could raise an OFI's cost of borrowing from the
System, and make this program less attractive to potential OFI
applicants.
The FCA expects each FCB and ACB to develop loan underwriting
standards that address OFI capital requirements. Compliance with these
loan underwriting standards are the basis for determining safety and
soundness in credit extensions. The FCA believes System banks need the
flexibility to tailor underwriting standards to manage the risks from
OFIs, based on the banks' risk-bearing capacity. As a safety and
soundness regulator, the FCA will not preclude FCBs and ACBs from
establishing a capital requirement that is more stringent than the 10:1
ratio in the statute. However, the final rule requires FCS funding
banks to treat OFIs equitably in this and other matters. The FCA adopts
proposed Sec. 614.4580 as a final regulation.
VI. Lending Limit to a Single OFI Borrower
The FCA proposed to eliminate the existing regulatory lending limit
on extensions of credit that OFIs make to their borrowers with FCS
funds. The proposal acknowledged that some OFIs will remain subject to
the lending limit that their primary regulator imposes under applicable
Federal or State law. Additionally, the FCA expects each FCB or ACB to
prudently manage the risk exposure caused by concentrations in OFI loan
portfolios through its loan underwriting standards and the GFA.
The FCA solicited commenters' views on whether the final rule
should contain a lending limit on extensions of credit that an OFI
makes to its borrowers with FCS funds. Additionally, the FCA requested
suggestions for other approaches to manage and control risks
originating through OFI lending relationships.
The ABA, IBAA, and the Council supported the repeal of the existing
50-percent lending limit on OFI borrowers. These commenters advised the
FCA that the repeal of the lending limit would enhance the Farm Credit
banks' ability to finance OFIs. These trade associations also claimed
that the repeal of existing Sec. 614.4565 would not imperil the safety
and soundness of System banks that maintain adequate loan underwriting
standards. The IBAA requested that the final regulation prohibit FCBs
and ACBs from establishing a lending limit below 50 percent. The IBAA
also expressed concern that the FCA's proposal would impose the Federal
or State lending limit on the affiliates and subsidiaries of regulated
financial institutions.
As the FCA originally proposed, the final rule repeals the lending
limit in existing Sec. 614.4565. In response to the IBAA, the FCA
observes that OFIs remain subject to any lending limit imposed by
Federal or State law. If the OFI is not subject to a Federal or State
lending limit, the funding banks' underwriting standards and the GFA
will address single borrower concentration risks in the OFI's
portfolio. The FCA rejects the IBAA suggestion that the final rule
prohibit FCBs and ACBs from establishing a
[[Page 36546]]
lending limit of less than 50 percent because it is inconsistent with
safety and soundness. The underwriting standards of each Farm Credit
bank should ensure that concentrations in an OFI's loan portfolio do
not expose the bank to unacceptable levels of risk.
VII. Equitable Treatment of OFIs and FCS Associations
Proposed Sec. 614.4590 promotes the equitable treatment of OFIs and
direct lender associations. Proposed Sec. 614.4590(a) would require
FCBs and ACBs to apply objective loan underwriting standards for both
types of borrowers. Under proposed Sec. 614.4590(b), the total charges
a Farm Credit bank assesses an OFI must be comparable to the charges it
imposes on direct lender associations. Furthermore, any variation in
funding costs must be attributed to differences in credit risk and
administrative costs.
The IBAA and the NDBA commented on proposed Sec. 614.4590.
According to the IBAA, references to ``similar'' underwriting standards
and ``comparable'' overall cost of funds in the proposed regulation
grants System banks too much discretion. The IBAA asserts that the
interest rates and the overall cost of funds should be equal for both
OFIs and direct lender associations. For this reason, the commenter
believes that the final regulation should require System banks to
disclose pricing information about their loans to FCS direct lender
associations. According to the IBAA, ``equal treatment'' entails lower
stock purchase requirements and mandatory dividend payments to OFIs
because they are not afforded voting rights and other privileges. The
NDBA commented that the final rule should require FCBs and ACBs to
adopt ``objective and uniform underwriting standards and pricing
requirements.''
The FCA observes that there are fundamental differences between
OFIs and direct lender associations. These differences make it
difficult to compare the treatment of these two types of financial
institutions. The following factors illustrate some of the basic
differences between OFIs and direct lender associations that preclude
identical treatment:
OFIs have access to several funding sources whereas direct
lender associations are required to borrow from their designated
funding bank.
Direct lender associations have significant amounts of
capital invested in their System funding bank, but most OFIs do not.
As part of a cooperative system, direct lender
associations share in System gains and losses. In contrast, OFIs have
limited exposure to System losses in the FCS.
Administrative costs for funding a direct lender
association and an OFI differ because OFIs are not required to maintain
a long-term commitment with an FCB or ACB.
Under these circumstances, the regulations can only require FCBs
and ACBs to treat OFIs and direct lender associations equitably, but
not equally. The FCA expects System funding banks to treat similarly
situated associations and OFIs comparably. Any variation in the overall
amounts that System funding banks charge OFIs and direct lender
associations for capitalization requirements, interest rates, and fees
shall be attributed to differences in credit risk and administrative
costs.
The FCA does not adopt any of the IBAA's suggestions for revising
this regulation. The final regulation does not require dividend
payments to OFIs, or establish OFI investment levels in System funding
banks because the FCA regulations do not impose business practices on
FCS institutions in the absence of compelling public policy or safety
and soundness reasons. The final regulation does not compel FCS funding
banks to charge identical rates to OFIs and FCS direct lender
associations, and therefore, it is unnecessary for FCBs and ACBs to
disclose pricing information for direct lender associations.
The FCA finds merit in the NDBA's suggestion that Sec. 614.4590(a)
should require FCBs and ACBs to establish comparable and objective loan
pricing standards for both OFIs and direct lender associations.
Accordingly, the FCA has incorporated this revision into final
Sec. 614.4590(a). Additionally, the FCA substitutes ``comparable'' for
``similar'' in final Sec. 614.4590(a) so that the language used
throughout this regulation is consistent.
VIII. Miscellaneous Issues
A. Association Funding of OFIs
One association asked the FCA to clarify that PCAs and agricultural
credit associations can establish and manage OFI relationships on
authority delegated by their System banks. The commenter observed that
such a program, established under System bank guidelines, would become
a natural adjunct to the participation authorities that associations
now exercise. Although the Act authorizes only FCBs and ACBs to provide
funding to OFIs, the FCA believes that direct lender associations have
considerable opportunities for involvement in their funding bank's OFI
relationships. Indeed, as funding banks have increasingly become
wholesale lenders, associations may be in a position to recruit OFIs,
assess the risk in the retail loans or collateral, and service the
credit relationship on behalf of the bank. Through their participation
authorities, associations may form effective alliances with other
agricultural lenders for the benefit of farmers and ranchers.
B. Small Business Investment Companies
A commercial bank holding company commented that the final
regulation should permit Small Business Investment Companies (SBICs) to
participate in the OFI program. According to the commenter, SBICs and
similar state-chartered entities need access to additional stable pools
of funds to support their agricultural lending operations. The
commenter also suggested that the FCA follow the lead of the Federal
Housing Finance Board and permit System banks to invest directly in
SBICs.
SBICs do not qualify as OFIs because they do not have one of the
charters specified in section 1.7(b)(1)(B) of the Act. Additionally,
Federal and State laws effectively preclude SBICs from participating in
the OFI program. As a result, the final regulation does not allow SBICs
to become OFIs.
The OFI regulations do not implement the investment authorities of
FCS banks under sections 1.5(15) and 3.1(13)(A) of the Act. An existing
investment regulation, Sec. 615.5140, does not authorize System banks
to invest in SBIC equities. However, the FCA recently proposed
amendments to Sec. 615.5140, and the Agency will consider the
commenter's request when it deliberates on the final investment
regulation.
C. Insolvency
The FCA received no comments about proposed Sec. 614.4600, which
governs the insolvency of OFIs. The FCA adopts proposed Sec. 614.4600
as a final rule.
List of Subjects
12 CFR Part 611
Agriculture, Banks, Banking, Rural areas.
12 CFR Part 614
Agriculture, Banks, Banking, Flood insurance, Foreign trade,
Reporting and recordkeeping requirements, Rural areas.
12 CFR Part 620
Accounting, Agriculture, Banks, Banking, Reporting and
recordkeeping requirements, Rural areas.
[[Page 36547]]
12 CFR Part 630
Accounting, Agriculture, Banks, Banking, Credit, Organization and
functions (Government agencies), Reporting and recordkeeping
requirements, Rural areas.
For the reasons stated in the preamble, parts 611, 614, 620, and
630 of chapter VI, title 12 of the Code of Federal Regulations are
amended to read as follows:
PART 611--ORGANIZATION
1. 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 P--Termination of Farm Credit Status--Associations
2. Section 611.1205 is amended by revising paragraph (c) to read as
follows:
Sec. 611.1205 Definitions.
* * * * *
(c) OFI means an other financing institution that has established a
funding and discount relationship with a Farm Credit Bank or an
agricultural credit bank pursuant to section 1.7(b)(1) of the Act and
the regulations in subpart P of part 614.
* * * * *
PART 614--LOAN POLICIES AND OPERATIONS
3. The authority citation for part 614 continues to read as
follows:
Authority: 42 U.S.C. 4012a, 4104a, 4104b, 4106, and 4128; secs.
1.3, 1.5, 1.6, 1.7, 1.9, 1.10, 1.11, 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, 4.3A, 4.12,
4.12A, 4.13, 4.13B, 4.14, 4.14A, 4.14C, 4.14D, 4.14E, 4.18, 4.18A,
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, 8.9 of the Farm Credit Act (12 U.S.C. 2011, 2013,
2014, 2015, 2017, 2018, 2019, 2071, 2073, 2074, 2075, 2091, 2093,
2094, 2096, 2121, 2122, 2124, 2128, 2129, 2131, 2141, 2149, 2154a,
2183, 2184, 2199, 2201, 2202, 2202a, 2202c, 2202d, 2202e, 2206,
2206a, 2207, 2219a, 2219b, 2243, 2244, 2252, 2279a, 2279a-2, 2279b,
2279b-1, 2279b-2, 2279f, 2279f-1, 2279aa, 2279aa-5, 2279aa-9); sec.
413 of Pub. L. 100-233, 101 Stat. 1568, 1639.
Subpart J--Lending Limits
4. Section 614.4350 is amended by revising paragraph (a) to read as
follows:
Sec. 614.4350 Definitions.
* * * * *
(a) Borrower means an individual, partnership, joint venture,
trust, corporation, or other business entity (except a Farm Credit
System association or other financing institution that complies with
the criteria in section 1.7(b) of the Act and the regulations in
subpart P of this part) to which an institution has made a loan or a
commitment to make a loan either directly or indirectly.
* * * * *
5. Subpart P of part 614 is revised to read as follows:
Subpart P--Farm Credit Bank and Agricultural Credit Bank Financing
of Other Financing Institutions
Sec.
614.4540 Other financing institution access to Farm Credit Banks
and agricultural credit banks for funding, discount, and other
similar financial assistance.
614.4550 Place of discount.
614.4560 Requirements for OFI funding relationships.
614.4570 Recourse and security.
614.4580 Limitation on the extension of funding, discount and other
similar financial assistance to an OFI.
614.4590 Equitable treatment of OFIs and Farm Credit System
associations.
614.4600 Insolvency of an OFI.
Subpart P--Farm Credit Bank and Agricultural Credit Bank Financing
of Other Financing Institutions
Sec. 614.4540 Other financing institution access to Farm Credit Banks
and agricultural credit banks for funding, discount, and other similar
financial assistance.
(a) Basic criteria for access. Any national bank, State bank, trust
company, agriculture credit corporation, incorporated livestock loan
company, savings association, credit union, or any association of
agricultural producers engaged in the making of loans to farmers and
ranchers, and any corporation engaged in the making of loans to
producers or harvesters of aquatic products may become an other
financing institution (OFI) that funds, discounts, and obtains other
similar financial assistance from a Farm Credit Bank or agricultural
credit bank in order to extend short- and intermediate-term credit to
eligible borrowers for authorized purposes pursuant to sections 1.10(b)
and 2.4(a) and (b) of the Act. Each OFI shall be duly organized and
qualified to make loans and leases under the laws of each jurisdiction
in which it operates.
(b) Assured access. Each Farm Credit Bank or agricultural credit
bank must fund, discount, or provide other similar financial assistance
to any creditworthy OFI that:
(1) Maintains at least 15 percent of its loan volume at a seasonal
peak in loans and leases to farmers, ranchers, aquatic producers and
harvesters. The Farm Credit Bank or agricultural credit bank shall not
include the loan assets of the OFI's parent, affiliates, or
subsidiaries when determining compliance with the requirement of this
paragraph; and
(2) Executes a general financing agreement with the Farm Credit
Bank or agricultural credit bank that establishes a financing or
discount relationship for at least 2 years.
(c) Underwriting standards. Each Farm Credit Bank and agricultural
credit bank shall establish objective policies and loan underwriting
standards for determining the creditworthiness of each OFI applicant.
(d) Denial of OFI access. A Farm Credit Bank or an agricultural
credit bank may deny the funding request of any creditworthy OFI that
meets the conditions in paragraph (b) of this section only when such
request would:
(1) Adversely affect a Farm Credit Bank or agricultural credit
bank's ability to:
(i) Achieve and maintain established or projected capital levels;
or
(ii) Raise funds in the money markets; or
(2) Otherwise expose the Farm Credit Bank or agricultural credit
bank to safety and soundness risks.
(e) Notice to applicants. Each Farm Credit Bank or agricultural
credit bank shall render its decision on an OFI application in as
expeditious a manner as is practicable. Upon reaching a decision on an
application, the Farm Credit Bank or agricultural credit bank shall
provide prompt written notice of its decision to the applicant. When
the Farm Credit Bank or agricultural credit bank makes an adverse
credit decision on an application, the written notice shall include the
specific reason(s) for the decision.
(f) Reports to the board of directors. Each Farm Credit Bank and
agricultural credit bank shall provide its board of directors with a
written annual report regarding the scope of OFI program activities
during the preceding fiscal year.
Sec. 614.4550 Place of discount.
(a) A Farm Credit Bank or agricultural credit bank may provide
funding, discounting, or other similar financial assistance to any OFI
applicant that:
(1) Maintains its headquarters in such funding bank's chartered
territory; or
(2) Has more than 50 percent of its outstanding loan volume to
eligible
[[Page 36548]]
borrowers who conduct agricultural or aquatic operations in such
funding bank's chartered territory.
(b) If the Farm Credit Bank or agricultural credit bank identified
in paragraph (a) of this section denies or otherwise fails to approve
an OFI's funding request within 60 days of receipt of a ``completed
application'' as defined by 12 CFR 202.2(f), the OFI may apply to any
other Farm Credit Bank or agricultural credit bank for funding,
discounting, or other similar financial assistance.
(c) The Farm Credit Bank or agricultural credit bank may grant its
consent for an OFI identified in paragraph (a) of this section to seek
financing from another Farm Credit Bank or agricultural credit bank.
(d) No OFI shall be required to terminate its existing funding or
discount relationship with a Farm Credit Bank or agricultural credit
bank if, at a subsequent time, an OFI relocates its headquarters to the
chartered territory of another Farm Credit Bank or agricultural credit
bank or the loan volume in the relevant territory falls below 50
percent.
Sec. 614.4560 Requirements for OFI funding relationships.
(a) As a condition for extending funding, discount and other
similar financial assistance to an OFI, each Farm Credit Bank or
agricultural credit bank shall require every OFI to:
(1) Execute a general financing agreement pursuant to the
regulations in subpart C of part 614; and
(2) Purchase non-voting stock in its Farm Credit Bank or
agricultural credit bank pursuant to the bank's bylaws.
(b) A Farm Credit Bank or agricultural credit bank shall extend
funding, discount and other similar financial assistance to an OFI only
for purposes and terms authorized under sections 1.10(b) and 2.4(a) and
(b) of the Act.
(c) Rural home loans to borrowers who are not bona fide farmers,
ranchers, and aquatic producers and harvesters are subject to the
restrictions in Sec. 613.3030 of this chapter. Loans that an OFI makes
to processing and marketing operators who supply less than 20 percent
of the throughput shall be included in the calculation that
Sec. 613.3010(b)(1) of this chapter establishes for Farm Credit Banks
and agricultural credit banks.
(d) The borrower rights requirements in part C of title IV of the
Act, and section 4.36 of the Act, and the regulations in subparts K, L,
and N of part 614 shall apply to all loans that an OFI funds or
discounts through a Farm Credit Bank or agricultural credit bank,
unless such loans are subject to the Truth-in-Lending Act, 15 U.S.C.
1601 et seq.
(e) As a condition for obtaining funding, discount and other
similar financial assistance from a Farm Credit Bank or agricultural
credit bank, all State banks, trust companies, or State-chartered
savings associations shall execute a written consent that authorizes
their State regulators to furnish examination reports to the Farm
Credit Administration upon its request. Any OFI that is not a
depository institution shall consent in writing to examination by the
Farm Credit Administration as a condition precedent for obtaining
funding, discount and other similar financial assistance from a Farm
Credit Bank or agricultural credit bank, and file such consent with its
Farm Credit funding bank.
Sec. 614.4570 Recourse and security.
(a) Full recourse and guarantee. All obligations that are funded or
discounted through a Farm Credit Bank or agricultural credit bank shall
be endorsed with the full recourse or unconditional guarantee of the
OFI.
(b) General collateral. (1) Each Farm Credit Bank and agricultural
credit bank shall take as collateral all notes, drafts, and other
obligations that it funds or discounts for each OFI; and
(2) Each Farm Credit Bank and agricultural credit bank shall
perfect, in accordance with State law, a senior security interest in
any and all obligations and the proceeds thereunder that the OFI
pledges as collateral.
(c) Supplemental collateral. (1) Each Farm Credit Bank and
agricultural credit bank shall develop policies and loan underwriting
standards that establish uniform and objective requirements to
determine the need and amount of supplemental collateral or other
credit enhancements that each OFI shall provide as a condition for
obtaining funding, discount and other similar financial assistance from
such Farm Credit bank.
(2) The amount, type, and quality of supplemental collateral or
other credit enhancements required for each OFI shall be established in
the general financing agreement and shall be proportional to the level
of risk that the OFI poses to the Farm Credit Bank or agricultural
credit bank.
Sec. 614.4580 Limitation on the extension of funding, discount and
other similar financial assistance to an OFI.
(a) No obligation shall be purchased from or discounted for and no
loan shall be made or other similar financial assistance extended by a
Farm Credit Bank or agricultural credit bank to an OFI if the amount of
such obligation added to the aggregate liabilities of such OFI, whether
direct or contingent (other than bona fide deposit liabilities),
exceeds ten times the paid-in and unimpaired capital and surplus of
such OFI or the amount of such liabilities permitted under the laws of
the jurisdiction creating such OFI, whichever is less.
(b) It shall be unlawful for any national bank that is indebted to
any Farm Credit Bank or agricultural credit bank, on paper discounted
or purchased, to incur any additional indebtedness, if by virtue of
such additional indebtedness its aggregate liabilities, direct or
contingent, will exceed the limitation described in paragraph (a) of
this section.
Sec. 614.4590 Equitable treatment of OFIs and Farm Credit System
associations.
(a) Each Farm Credit Bank and agricultural credit bank shall apply
comparable and objective loan underwriting standards and pricing
requirements to both OFIs and Farm Credit System direct lender
associations.
(b) The total charges that a Farm Credit Bank or agricultural
credit bank assesses an OFI through capitalization requirements,
interest rates, and fees shall be comparable to the charges that the
same Farm Credit Bank or agricultural credit bank imposes on its direct
lender associations. Any variation between the overall funding costs
that OFIs and direct lender associations are charged by the same
funding bank shall result from differences in credit risk and
administrative costs to the Farm Credit Bank or agricultural credit
bank.
Sec. 614.4600 Insolvency of an OFI.
If an OFI that is indebted to a Farm Credit Bank or agricultural
credit bank becomes insolvent, is in process of liquidation, or fails
to service its loans properly, the Farm Credit Bank or agricultural
credit bank may take over such loans and other assets that the OFI
pledged as collateral. Once the Farm Credit Bank or agricultural credit
bank exercises its remedies, it shall have the authority to make
additional advances, to grant renewals and extensions, and to take such
other actions as may be necessary to collect and service loans to the
OFI's borrower. The funding Farm Credit Bank or agricultural credit
bank may also liquidate the OFI's loans and other assets in order to
achieve repayment of the debt.
[[Page 36549]]
PART 620--DISCLOSURE TO SHAREHOLDERS
6. The authority citation for part 620 continues to read as
follows:
Authority: Secs. 5.17, 5.19, 8.11 of the Farm Credit Act (12
U.S.C. 2252, 2254, 2279aa-11); sec. 424 of Pub. L. 100-233, 101
Stat. 1568, 1656.
Subpart B--Annual Report to Shareholders
Sec. 620.5 [Amended]
7. Section 620.5 is amended by removing the word ``financial'' and
adding in its place the word ``financing''; and by removing the words
``, as defined in Sec. 614.4540(e) of this chapter'' in paragraph
(a)(8).
PART 630--DISCLOSURE TO INVESTORS IN SYSTEMWIDE AND CONSOLIDATED
BANK DEBT OBLIGATIONS OF THE FARM CREDIT SYSTEM
8. The authority citation for part 630 continues to read as
follows:
Authority: Secs. 5.17, 5.19 of the Farm Credit Act (12 U.S.C.
2252, 2254).
Subpart B--Annual Report to Investors
Sec. 630.20 [Amended]
9. Section 630.20 is amended by removing the words ``, as defined
in Sec. 614.4540(e) of this chapter'' in paragraph (a)(1)(v).
Dated: June 26, 1998.
Floyd Fithian,
Secretary, Farm Credit Administration Board.
[FR Doc. 98-17844 Filed 7-6-98; 8:45 am]
BILLING CODE 6705-01-P
